Legislation overview (August 2021)

Taxes

Unified Social Contribution

The Cabinet of Ministers of Ukraine by Resolution No. 850 of August 4, 2021 “On Amendments to the Procedure for Accrual and Payment of a Single Contribution for Compulsory State Social Insurance for Certain Categories of Insured Individuals” (hereinafter – Resolution No. 850), which entered into force on August 17, 2021 year, amended the Procedure for accrual and payment of a single contribution to the obligatory state social insurance for some categories of insured persons, in particular:

• the list of persons for whom the state pays insurance premiums, able-bodied parents, adoptive parents, guardians, custodians, foster parents, carers who actually care for a child with a disability, a child with severe perinatal nervous system damage, severe congenital malformation development, rare orphan disease, oncological, oncohematological disease, cerebral palsy, severe mental disorder, type I diabetes mellitus (insulin-dependent), acute or chronic kidney disease of IV degree, for a child who has suffered a serious injury, needs an organ transplant, needs palliative care, which is not established disability, also include able-bodied persons who are in employment and who were granted leave without pay on the terms provided for in paragraph 3 of Part 1 of Art. 25 of the Law “On Leave”, if such persons receive assistance, allowance or compensation in accordance with the law;
• it is specified that the calculation of the single contribution is also carried out by the payers of the single contribution – structural units for social protection of the population of the district, district in city of Kyiv and Sevastopol state administrations, executive bodies of village, settlement, city, district councils in cities (in case of formation) – for the persons specified in subitems 2-4 item 1 of the Order, namely for:
  • persons who take care of a child before reaching the age of three and in accordance with the law receive child care assistance until the child reaches the age of three and/or assistance at the birth of a child, at the adoption of a child;
  • one of the unemployed able-bodied parents, adoptive parents, guardians, trustees, foster parents, carers who actually care for a child with a disability, a child suffering from a severe rare disease, etc .;
  • foster carers, foster parents of family-type orphanages, foster parents, if they receive financial support in accordance with the law.

Corporate Income Tax

The Ministry of Finance of Ukraine by Order No. 317 of June 4, 2021, which entered into force on August 17, 2021, approved changes to the form of the Tax return on corporate income tax.

In particular:

• in the Return on the reflection of information in the case of activities of a non-resident in the territory of Ukraine through a permanent representative office, taking into account the adopted by laws No. 466, 786, 1117 amendments to subitem 133.2.2, item 133.3 and subitem 141.4.7 of the Tax Code;
• in the Annex to the TI on the possibility of displaying information about a non-resident who is a beneficial (actual) recipient (owner) of income with a source of origin from Ukraine in the case of application in accordance with Art. 103 of the Tax Code provisions of the international agreement of Ukraine with the country, the resident of which is the relevant beneficial (actual) recipient (owner) of such income;
• in Annex DI:
  • the difference by which the pre-tax financial result is increased is excluded, - the amount of expenses incurred by the taxpayer in carrying out transactions with non-residents, if such transactions have no business purpose (the version of subitem 140.5.15 of the Tax Code was effective until January 1, 2021).
  • supplemented by a new difference in the increase of the pre-tax financial result for the tax (reporting) period by the amount of expenses related to the implementation of the terms of the budget grant agreement incurred in the current reporting period due to such grants (but not more than such grants) and included to the costs of the current reporting period in accordance with national provisions (standards) of accounting or international financial reporting standards (subitem 140.5.16 of the Tax Code);
  • supplemented with new differences in reducing the pre-tax financial result of the tax (reporting) period:
    • in the amount of budget grants received by the taxpayer and included in the income of the reporting period in accordance with national regulations (standards) of accounting or international financial reporting standards (subitem 140.4.8 of the Tax Code);
    • in the amount of received one-time compensation to business entities in accordance with the Law of Ukraine “On social support of insured persons and business entities for the period of restrictive anti-epidemic measures introduced to prevent the spread of acute respiratory disease COVID-19 caused by SAR -CoV-2” and included in the income of the reporting period in accordance with national provisions (standards) of accounting or international financial reporting standards (item 54 of section 4 of chapter XX of the Tax Code);
    • the amount of written off fines and penalties in accordance with item 23 and written off tax debt in accordance with item 24 of section 10 of chapter XX of the Tax Code and included in the income of the reporting period in accordance with national provisions (standards) or international financial reporting standards (paragraph 54 of subsection 4 of section XX of the Tax Code);
• in the Annex AM regarding the display in accordance with subitem 138.3.2 of the Tax Code, for the purposes of calculating the difference by which the pre-tax financial result is increased in accordance with item 140.2 of the Tax Code, information on capitalized interest to be included in the cost of a non-current asset in accordance with national accounting standards or international financial reporting standards.

In accordance with item 46.6 of the Tax Code, the new forms of return come into force for reporting for the tax period following the tax period in which they were published. As Order No. 317 was published in the third quarter of 2021, for the first time a new return form will be submitted for the fourth quarter of 2021.

Accounting and Reporting

The Ministry of Finance of Ukraine by Order No. 385 of July 9, 2021 amended some regulations on accounting.

1. It is specified that in the primary document the details ‘unit of measurement of a business transaction’ indicate in money and, if possible, in kind. To do this, para. 1 of item 2.4 Provisions No. 88 was adjusted.

2. At once in several NAS the mention of COATTU codes was replaced by KATOTTG (Codifier of administrative-territorial units and territories of territorial communities).

3. In the form No. 2-мс the position “Total costs (2050 + 2165)” was stated in the new edition.

4. In Procedure No. 1213 states the updated rule that provides that the direction of enterprises of the state, municipal sectors of the economy part of the net profit on the quarterly and annual balance sheet date reflect the material incentive – by debiting sub-account 443 “Profit used in the reporting period” and credit account 66 “Payments to employees” is the amount of remuneration, benefits, bonuses, etc. accrued to employees, which is calculated from the profit of the previous reporting quarter (year) in accordance with the law, constituent and administrative documents and taking into account the financial plan.

5. From NAS 1 “General requirements for financial reporting” the rule that the application of IFRS for small and medium enterprises is not allowed by enterprises that do not fall within its scope was removed.

Control and Responsibility

The Cabinet of Ministers of Ukraine is strengthening control over the repayment of payroll arrears. In particular, the work will be intensified through weekly meetings at the Government level and a focus discussion on the issues of specific government bodies and regions, etc.

Representatives of SC Ukroboronprom, the Ministry of Energy, the State Space Agency, Donetsk, Kharkiv regions and the city of Kyiv took part in the regular meeting of the Interdepartmental working group on repayment of payroll arrears. In addition, representatives of other central executive bodies, regional state administrations, and trade unions were traditionally present.

As a result of the meeting, it was decided to hold, at least in the next two months, weekly meetings of the working group, update and publish on the official websites of debt reduction schedules. Also, intensification of work in this direction will allow to draw more attention of the relevant authorities and leadership in the regions to the problem of debt and will create conditions for effective search for solutions and strengthening responsibility.

Financial Markets

Resolution of the National Bank of Ukraine No. 85 of August 12, 2021 “On Approval of Amendments to Certain Regulations of the National Bank of Ukraine on Cash Circulation” (hereinafter – Resolution No. 85) modernized the procedure and requirements for cash transactions in banks and collection companies, taking into account the rapid development of digital technologies in the field of cash circulation and the active introduction of electronic document management in the financial sector.

First of all, the regulator has provided for the possibility of introducing by banks and companies that have received a license to provide banks with collection services:

• circulation of electronic documents using a qualified/improved electronic signature and a qualified/improved electronic seal;
• application of coding in accompanying documents and in product labeling, as well as integration of modern digital communications into cash accounting processes, which increases the efficiency and security of operations for the collection of funds and transportation of currency values,
• identification of various means of identification and verification of the collector, in particular with the use of digital technologies;
• clarification of the form and requirements for issuing an accompanying cash order for a bag with currency values.

In addition, the National Bank has:

• granted the bank (branches, outlets) the right to provide cash services to customers using its digital handwritten signature;
• expanded the list of bank services to be provided on the basis of internal documents, in particular on the organization and operation of remote service centers, including work with payment devices;
• defined the requirements for collection campaigns, which under contractual terms with the client can exchange banknotes for circulation, coins for banknotes, banknotes (coins) of one denomination for banknotes (coins) of other denominations;
• strengthened the requirements for banks on the obligation to resolve disputes related to cash transactions in accordance with the legislation of Ukraine at the request of the client, including the exchange of banknotes and coins withdrawn by the National Bank from circulation, transactions, made through payment devices.

This document amends:

• Instructions on the organization of collection of funds and transportation of currency values ​​of banks of Ukraine, approved by Resolution of the Board of the National Bank of Ukraine No.29 of March 31, 2017 (as amended);
• Instructions on conducting cash operations by banks in Ukraine, approved by Resolution of the Board of the National Bank of Ukraine No. 103 of September 25, 2018.

The Resolution came into force on August 18, 2021. At the same time, banks and companies that have received a license to provide collection services to banks will have sufficient time (six months) to bring their internal documents in line with its requirements.

Transfer Pricing

The Ministry of Finance of Ukraine has approved three Generalized Tax Consultations on Transfer Pricing (hereinafter – TP) and Taxation of Income of Non-Residents.

Based on the results of the work of the Expert Council for the Preparation of Generalized Tax Consultations (hereinafter – GTC) at the Ministry of Finance, Orders of the Ministry of August 20, 2021 approved Consultations on:

· issues of taxation of income of non-residents, which are equated to dividends (Order No. 480);

· filling in the notification on participation in the international group of companies (Order No. 479);

· temporary suspension of the deadline for taxpayers to respond to requests from regulatory authorities to submit documentation on transfer pricing (Order No. 478).

Summary of Court Rulings

The Supreme Court of Ukraine, composed of a panel of judges of the Administrative Court of Cassation (decision of August 19, 2021 in case No. 804/3049/17) considered the dispute between the employer and the State Labor Office regarding the possibility of performing high-risk work under a civil contract.

It was once again emphasized that it is inadmissible to issue a civil contract for the performance of dangerous work with individuals who do not have the appropriate knowledge, experience and, in cases specified by law, permission (permit), as well as work that is permanent.

In addition, since the declaration of compliance of the material and technical base with the requirements of the legislation is submitted and authorized by the employer, the high-risk work specified in such a permit can be performed only by employees of such employer and not by individuals providing services under civil contract, provided that they do not have permits to perform such work.

Along with such findings, the Supreme Court also did not take into account the plaintiff’s arguments that an integral part of the offense under Art. 265 of the Labor Code, – the presence of payment of wages (remuneration) without accrual and payment of a single social contribution (hereinafter –SSC) and taxes.

In para. 2 item 2 Art.. 265 of the Labor Code provides for three independent violations:

• admission of the employee to work without registration of the employment agreement (contract);
• registration of the employee for part-time work in case of actual performance of full-time work established at the enterprise;
• payment of salary (remuneration) without accrual and payment of SSC and taxes.

Common to the above offenses is a sanction that provides for a fine of 10 times the minimum wage established by law at the time of the violation, for each employee in respect of which the violation was committed, and for legal entities and sole proprietors who use hired labor and are single taxpayers of 1-3 groups, warnings are applied.

Labor and Salaries

The Cabinet of Ministers of Ukraine by Resolution No. 829 of August 11, 2021, set out in a new wording item 12 of the Procedure for confirmation of existing work experience for assignment of pensions in the absence of an employment record book or relevant entries in it.

This norm stipulates that for citizens who have been unjustifiably prosecuted, repressed persons who have been subsequently rehabilitated, time of detention, time of serving a sentence in places of imprisonment and exile, as well as stay in compulsory treatment are included in the insurance record. Inclusion such a period is carried out on the basis of certificates (documents) issued by the authorized bodies on rehabilitation (certificate of the court, prosecutor’s office or pre-trial investigation on the closure of criminal proceedings or a court certificate on acquittal).

Previously, the regulations did not regulate the cases of inclusion in the insurance period of such periods, if such certificates (documents) on rehabilitation are missing. Due to Resolution No. 829, if a person does not have the necessary certificates of rehabilitation, time of detention, rehabilitated people will have the time of serving a sentence in places of imprisonment and time of involuntary treatment included in the insurance record on the basis of a relevant court decision.

The Other Things

The President of Ukraine signed the Law “On Peculiarities of Providing Public (Electronic Public) Services” No. 1689-ІХ, which was adopted by the Parliament on July 15, 2021.

The law introduces new terms, such as ‘electronic public service’, ‘automatic mode of providing electronic public service’, ‘integrated electronic public service’, ‘system of electronic interaction of electronic resources’, as well as other terms related to the provision (receipt) of electronic public services.

The document also defines the features of providing such services, the procedure for obtaining and features of registration of the results of their provision.

The law enters into force three months after its publication. During this time, the Cabinet of Ministers of Ukraine must approve an action plan for the transition of public services to electronic form.