Taxes
VAT
The State Tax Service of Ukraine through the Office of Large Taxpayers spoke about the peculiarities of taxation of advertising on social networks registered outside Ukraine. What should companies that have decided to carry out such an advertising campaign expect?
The legal entities that pay for advertising with corporate payment card through international payment systems must comply with the provisions of Instruction approved by the NBU Board of Directors No. 492 of November 12, 2003 and the Regulation on Measures to Protect and Determine the Procedure for Performing Individual Transactions in Foreign Currency (Resolution of the Board of the NBU No. 5 of January 2, 2019).
Thus, according to subitem 2, i. 109, subitem 7, i.2 of Regulation No. 5, as well as being guided by part 1 of Art. 15 of the Law of Ukraine “On Prevention and Counteraction of Legalization (Laundering) of the Proceeds of Crime, Financing Terrorism and Financing the Proliferation of Weapons of Mass Destruction” No. 1702-VII of October 4, 2014 the legal entities with corporate payment card are allowed to make payments under one foreign economic agreement for one operational day up to 150 thousand UAH.
In this case, the adviser submits an advance report for the funds spent on the card with the addition of a printed electronic confirmation document. And the confirmation of the expense of funds during the acquisition by the legal entity of services on foreign internet sites will be an extract from the bank that issued such payment card and the corresponding receipt from the service provider.
Businesses account for advertising costs according to accounting rules. If the FEA services are received by a high-income enterprise, then its financial result can be adjusted for tax differences:
- according to subitem 140.5.2 of the TCU – for the amount of excess of the agreed (contractual) value of the purchased services over the price, determined by the principle of “outstretched hand”, during the performance of controlled transactions in the cases determined by Art. 39 of the TCU;
- according to subitem 140.5.4 of the TCU – for the amount of 30% of the cost of services (except for transactions recognized as controlled in accordance with Art. 39 of the TCU) purchased from non-residents (including non-residents – related persons) registered in the states (territories) specified in subitem 39.2.1.2 of the TCU, that is, according to the List of “low tax” countries (Cabinet of Ministers of Ukraine Decree No. 1045 of December 27, 2017) and List of organizational and legal forms (Cabinet of Ministers of Ukraine Decree No. 480 of July 4, 2017).
As for VAT, since the place of supply of services is located in the customs territory of Ukraine, in accordance with item 180.2 of the TCU, recipient of the services is responsible for charging and paying the tax to the budget in the case of provision of services by non-residents not registered as taxpayers.
In this case, the basis of VAT calculation is the contractual cost of services (i. 190.2 of the TCU). In this case, the cost of services is converted into national currency at the rate of the National Bank, effective in the date the tax liabilities arise.
The VAT liabilities on non-resident services with a place of supply in the territory of Ukraine are calculated according to the rules provided by i. 187.8 of the TCU – on the date of debiting the payer's bank account to pay for services or on the date of registration of a document confirming the fact of supply of services by a non-resident.
The amount of accrued VAT liabilities is recorded in the TI issued for such transaction (i. 208.2 of the TCU). Such PN, registered with the URTI, will be the basis for reflecting the amount of VAT in the tax credit of the enterprise (i. 208.2, subitem “c”, i. 198.1, i. 198.2 of the TCU).
If the recipient of the service is not registered as a taxpayer, the TI is not prepared (i. 208.4 of the TCU). The form for calculating the tax liability of such service provider in the form of an annex to the tax declaration is approved in the manner provided for in Art. 46 of the TCU.
In addition, according to subitem 141.4.6 of the TCU the residents who make payments to non-residents for the production and/or distribution of advertising pay a tax at the rate of 20% of such payments at their own expense during such payment.
The amount of income from which the income is to be paid is determined at the rate of the NBU effective on the date of payment of such income.
In case of non-payment or late payment of tax the enterprise will have to pay a fine in accordance with Art. 127 of the TCU.
Environmental Tax
The State Tax Service of Ukraine in the individual tax consultation “On green tax” No. 1262/6/99-00-04-04-03-15/ІПК of November 8, 2019 clarified whether the enterprises are to pay the green tax for the disposal of waste, if there are agreements with specialized enterprises for disposal.
Tax specialists reported that the green tax payer in the part of the waste generated by the enterprise are specialized enterprises that have received permits from the authorized bodies to dispose permanently waste in specially designated areas or objects (places of disposal of waste, storage facilities, landfills, complexes, structures, areas of subsoil, etc.).
To ensure the requirements of i. 240.5 of the Tax Code of Ukraine, the business entities, including the enterprise, must be equipped with specially designated places for temporary disposal of waste and introduce proper accounting of waste of different classes of hazard for contractual obligations with specialized enterprises for disposal or placement (burial) of waste.
Control and Responsibility
The Ministry of Digital Transformation of Ukraine is launching the E-Residency project – the country's electronic citizenship.
E-residency gives foreign businesses the following opportunities:
- remotely create and manage businesses in Ukraine;
- sign documents with an electronic signature that fully complies with the new legislation;
- gain access to the banking services, convenient online payments and work with suppliers.
As a result, people from all over the world will be able to easily set up a business in Ukraine. And this will benefit the domestic economy.
The most successful example of a country where the e-residence system works is Estonia. Currently, over 60,000 people from 160 countries have benefited from the Estonian program. In 2018, e-residents contributed 8.7 million euros in Estonian budget. In total, the system brought in € 25 million. And this is not the only example – similar conditions for foreign citizens and companies also work in Azerbaijan. The Government plans to approve the pilot project by the beginning of next year.
Financial Markets
The National Bank of Ukraine has simplified the procedure for issuing a license for transferring funds in national currency without account opening for non-bank institutions, eliminating the obligation of a non-bank institution to agree with the National Bank internal rules on funds transfer.
From now on, a package of documents for obtaining a license, instead of internal rules on funds transfer, will provide information about the terms and procedure for providing non-bank institutions with the help of funds transfer services in the form of a sample questionnaire.
This form of document will be clearer and more transparent to the applicant. Its preparation by the applicant and processing by the National Bank staff will require much less time.
A sample of information sheet to be filled out in a convenient questionnaire form is available on the official website of the National Bank of Ukraine in the section “Documents for obtaining a license to transfer funds in national currency without accounts opening”.
Concerning the internal rules for transferring funds, they become the document of the internal use of the non-bank institution exclusively. Such document (together with the internal control procedure and other internal documents) shall be developed and approved prior to the commencement of funds transfer services in accordance with the updated requirements for them, harmonized with Directive (EU) 2015/2366 (PSD2) and the EBA Guidelines.
In addition, the requirements for a business plan submitted by the non-bank institution to the National Bank for the license have been updated.
The relevant amendments to the Regulation on the procedure for issuing a license to transfer funds in national currency without accounts opening were approved by resolution of the NBU Board “On Amendments to Certain Regulations of the National Bank of Ukraine” No. 128 of November 6, 2019. The resolution becomes effective as of November 15, 2019.
Labor and Salaries
The State Labor Service of Ukraine has clarified the features of overtime work. Working time is closely linked to the legal regime of overtime work, which is exclusively exceptional for employment.
According to the Labor Code of Ukraine (hereinafter – LCU), overtime is considered to be work in excess of the established working hours.
Features of the overtime work:
- the employer has the right to use overtime work only in exceptional cases, which include the following: 1) during the work necessary for the defense of the country, as well as the prevention of public or natural disaster, industrial accident and immediate elimination of their consequences; 2) during carrying out publicly necessary works on water supply, gas supply, heating, lighting, sewerage, transport, communication – to eliminate accidental or unexpected circumstances that disrupt their proper functioning; 3) if necessary, finish the work which, due to unforeseen circumstances or accidental delays in the technical conditions of production, could not be completed in normal working hours, when its termination could lead to damage or loss of state or public property, and also in case of urgent repair of machinery, machine tools or other equipment where malfunctioning causes them to stop work for a large number of workers; 4) in case of necessity of carrying out loading and unloading works with the purpose of preventing or eliminating idle rolling stock or accumulation of cargoes at the points of departure and destination; 5) to continue work in case the employee does not show up to perform the work which cannot be interrupted (the employer must replace the absent employee with another);
- it is forbidden to involve in the overtime work certain categories of workers: pregnant women and women who have children under the age of three; persons under the age of 18; employees studying in general schools and vocational schools on the days of studying; other categories of employees in accordance with the current legislation of Ukraine
- certain categories of workers may be engaged in overtime work only with their consent or on condition that it does not contradict medical advice: women with children between the ages of three and 14 or a disabled child may only engage in overtime work with their consent, and involvement of persons with disabilities in overtime work is possible only with their consent and provided that this does not contradict medical recommendations;
- overtime work should not exceed four hours for each employee for two consecutive days and 120 hours per year. The employer must keep records of the overtime work of each employee;
- overtime work can be carried out on the basis of an order of the employer, which should specify the legal prerequisites for their application, indicating the employees involved, as well as with the permission of the elected body of the primary trade union organization (trade union representative) of the enterprise, institution, organization.
