Taxes
The State Tax Service of Ukraine has informed that Law of Ukraine No. 1914-ІХ of November 30, 2021 “On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine to Ensure Balanced Budget Revenues” changed the approach to determining the object of corporate income tax as large taxpayers: a separate procedure for reflecting the negative value of the object of taxation of the taxpayer of previous tax (reporting) years (“tax losses”) has been introduced
Thus, starting from the first tax (reporting) period of 2022, large taxpayers have the right to reduce the object of taxation by no more than 50 percent of the accumulated tax losses of previous tax (reporting) years.
The Register of Large Taxpayers for 2022 (hereinafter – the Register) includes 1340 legal entities (the Register was approved by Order of the State Tax Service No. 838 of September 24, 2021 (as amended by Order of the State Tax Service No. 1045 of December 17, 2021).
For corporate income taxpayers not included in the Register, the procedure for recording tax losses remains unchanged, namely: when calculating the object of taxation based on the results of the relevant tax (reporting) period, the taxpayer has the right to reduce the pre-tax financial result by the full amount negative value of the object of taxation of previous tax (reporting) years (the first paragraph of subitem 140.4.4 of item 140.4 of Article 140 of Chapter III of the Code).
Accounting and Reporting
The Ministry of Finance of Ukraine by Order No. 7 of January 12, 2022 has approved the General Tax Consultation on certain issues of taxpayer accounting.
The consultation provides answers to the questions in which individual cases the taxpayer is obliged to:
- register with the relevant supervisory authorities at the main and non-main place of registration by submitting a notification under form 20-ОПП;
- inform the controlling bodies at the main place of registration about individual objects of taxation and objects related to taxation;
- submit notifications under form 20-ОПП about the objects of taxation of their separate subdivisions (branches, representative offices).
The Consultation also provides an answer to the question of the application of penalties for entering information under form 20-ОПП, other than in the Recommended Handbook of Types of Tax Objects, which is published on the official website of the State Tax Service.
Clarification of these issues will eliminate the ambiguous interpretation of certain provisions of tax law in terms of the procedure and obligation of taxpayers to submit to the supervisory authorities of the notification under form 20-ОПП.
Control and Responsibility
The Ministry of Finance of Ukraine by Order No. 702 of December 22, 2021 has approved in the new edition the Procedure for registration of results of documentary checks of observance of the legislation of Ukraine concerning tax, currency and other legislation by taxpayers.
The document defines the basic requirements for the form and content of the act (certificate) of documentary inspection, informative annexes to the act (certificate) of documentary inspection, the procedure for its signing, registration and storage.
The results of documentary inspections are drawn up in the form of an act or certificate. In case of establishment of violations during the inspection, an act of documentary inspection is drawn up, and in case of absence of violations – a certificate of documentary inspection.
The act (certificate) of documentary inspection is drawn up in two copies and signed by officials of the controlling body who conducted the audit, or persons authorized to do so in the prescribed manner, as well as taxpayers (taxpayer’s head or authorized person) or their legal representatives (if any).
The facts of identified violations are set out in the act clearly, objectively and fully with reference to primary documents, registers of tax and accounting, financial and other reporting, other documents related to the calculation and payment of taxes, fees, charges, maintenance/compilation which are provided by law, or received from other business entities, public authorities, including foreign, law enforcement agencies, as well as tax information confirming the existence of these facts.
The document of documentary inspection must contain information on the facts and circumstances that confirm and prove the guilt of the taxpayer (with a detailed description; a study that proves that the taxpayer was able to comply with the rules and regulations established by the Tax Code, but did not use sufficient measures to comply with them, documents and information confirming the guilt of the taxpayer), as well as information on mitigating circumstances or circumstances that release the taxpayer from financial responsibility.
The Procedure does not apply to the registration of the results of inspections on taxpayer’s compliance with the arm's length principle.
Controlled Transactions and Transfer Pricing
The Ministry of Finance of Ukraine has explained the application of the “business purpose” during the inspections. Based on the results of the Expert Council on the Preparation of General Tax Consultations (GTC) under the Ministry of Finance, the Ministry of Finance approved the Consultation on the practical application of a set of rules on the existence of “reasonable economic purpose (business purpose)” during inspections by regulatory authorities by Order No. 11 of January 13, 2022.
The consultation provides clarification on the provisions of the Tax Code of Ukraine on business purposes. In particular:
- algorithm and features of application of the provisions of the Code related to the identification of controlled transactions, their analysis, as well as the application of appropriate adjustments;
- peculiarities of application of the provisions of the Code regarding the existence of a business purpose in tax (reporting) periods, starting from January 1, 2021, as well as tax (reporting) periods, covering the period from May 23 to December 31, 2020 (inclusive);
- application of business purpose criteria to transactions concluded before January 2021, but business transactions for which were carried out after January 1, 2021;
- identification and application of alternative transaction options that are actually available to each of the parties to the agreement, in order to determine the terms of the agreement (contract), which would be agreed by unrelated parties operating commercially rationally in comparable terms;
- connection between the criteria of business purpose, defined by subitem 14.1.231 of the Tax Code, and the criteria defined by the third paragraph of item 103.2 of the Tax Code, on the application of tax benefits in the form of tax exemption or reduced tax rate provided by international agreement.
In addition, the Consultation provides practical situations (5 examples) of business objectives that comply with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and reflect the most common situations that may arise for taxpayers.
Financial Markets
The National Bank of Ukraine has improved its foreign direct investment (FDI) methodology in line with international standards.
From now on, balance of payments (BP) and international investment position (IIP) statistics in FDI will take into account loans received from non-resident sister companies. Sister companies are companies that have a common direct or indirect investor, but own less than 10% of each other’s share capital.
Such FDI accounting allows you to cover more debt transactions within international corporations, more accurately determine the amount of investment and better reflect their focus.
Accounting for loans between sister companies does not affect the balance of the financial account of the balance of payments due to the reclassification of loans from the item “Other investments” to the item “Direct investment”.
At the same time, according to the results of accounting for loans between sister companies, net FDI stocks at the end of the third quarter of 2021 were revised by 6 billion USD (from 55.1 to 61.1 billion USD).
As in the statistics of FDI loans between sister companies are classified according to the resident affiliation of the ultimate controlling investor, FDI in Ukraine increased by $ 3.7 billion USD, FDI abroad decreased by 2.3 billion USD.
Relevant retrospective revisions of the time series of external sector statistics have been made since 2015.
Labor and Salaries
The Ministry of Economy of Ukraine has published a draft Law “On Amendments to Certain Legislative Acts of Ukraine (on Reforming Legislation in the Sphere of Social Leave)”.
The norms of the project ensure the individual right of each of the child’s parents to unimpeded (not limited by external circumstances) social leave. The need to exercise such a right, the period of implementation (simultaneous use of leave or otherwise) is determined by agreement between the child’s parents, at their discretion.
Childcare leave until the child reaches the age of three will be granted to both the mother and the father of the child. Such leave can be used by parents at the same time.
The draft act defines the term “single mother”/“single father”, which should be used in the application of labor law and, accordingly, an exhaustive list of categories of persons to be included.
The draft proposes to provide for the right to childcare leave for the “legal representatives of the child with whom the child lives” instead of the ambiguous term “other relatives of the child”. In practice, there are many cases when due to the lack of definition of the term “other relatives” and a list of documents confirming the actual care of the child, employees are denied the right to such leave. The list of legal representatives of the child is reflected in the Civil Code of Ukraine.
The draft defines the right of a grandmother, grandfather or legal representative of a child to leave to care for a child who is an orphan, deprived of parental care and/or whose mother or father is single.
The draft also clearly regulates the procedure and conditions for granting (compensation for dismissal) parental leave. Thus, it is planned to determine that in case of dismissal the employee is paid monetary compensation for all unused days of “child’s” leave, transferred from the previous calendar year on the grounds provided for in Article 80 of the Labor Code (provided no compensation before), as well as for all unused days of annual leave.
In order to implement the provisions of subitem 2 of item 3 of Chapter II of Council Directive 2010/18/EU of March 8, 2010, the draft act transposed the provision on early notification of the employer by the child's parents of their intention to take such leave.
The Other Things
The Cabinet of Ministers of Ukraine has adopted a resolution on some issues of implementation of the program of state guarantees of medical care, which will regulate the procedure for payment for medical services in 2022.
The resolution will ensure payment for medical services provided by health care institutions at the expense of the state budget under the medical guarantees program, in particular under concluded agreements and reimbursement agreements.
The adopted resolution will allow:
- National Health Service of Ukraine – to enter into agreements with health care facilities that meet the requirements for the health care provider; enter into agreements with pharmacies on the reimbursement of medicines;
- health care facilities – to provide medical services to patients and receive funds from the state budget;
- pharmacies – to receive reimbursement of the cost of medicines included in the program of medical guarantees from the state budget;
- population – to receive quality medical services, in accordance with the list of packages of medical services, as well as medicines, the cost of which is reimbursed in accordance with the approved resolution.
It will be reminded, that the Law of Ukraine “On state financial guarantees of medical service for the population” provides that the state guarantees within the limits of the program of medical guarantees fully paid from the State budget of Ukraine of necessary medical services and medicines connected with granting:
- emergency medical care;
- primary care;
- secondary (specialized) medical care;
- tertiary (highly specialized) medical care;
- palliative care;
- medical rehabilitation;
- medical care for children under 16;
- medical care in connection with pregnancy and childbirth
To citizens, foreigners, stateless persons permanently residing in the territory of Ukraine, and persons recognized as refugees or persons in need of additional protection.
