Taxes
VAT
The State Fiscal Service of Ukraine in its individual tax advice “On the necessity to determine VAT liabilities upon return of the leased object after the expiry of the lease agreement, provided that the tenant has improved the leased object, and on the procedure for taxation of VAT transactions for funds receipt in the form of a guarantee payment in case of change of the lessor” No. 703/6/99-00-07-03-02-15/ІПК of October 10, 2019 has explained whether it is necessary to determine value added tax liabilities (hereinafter – VAT) in case of return of the object lease after the lease agreement expires, provided that the tenant has improved the lease object. The tax authority spokeout on the procedure for taxation of VAT transactions for receipt of funds in the form of a guarantee payment in case of change of the lessor.
Therefore, if after the expiry of the lease agreement the improvement of the lease object made by the tenant is not transferred to the lessor and no additional transfer operations agreements are concluded for the transfer, and the improvement continues to be used by the tenant under the new lease agreement, then there is no grounds for charging the tenant with VAT liabilities. It is not a supply of goods or services within the meaning of paragraphs 14.1.185 and 14.1.191 of the TCU.
When the terms of the agreementstipulate that the guarantee payments are used as rent for the last month of the lease and are not refundable to the tenant, then this amount of the guarantee payments increases the VAT tax base. The tax liabilities of the lessor and the tax credit of the tenant in case of receipt/ transfer of such guarantee payment are determined in a general manner on the basis of a tax invoice prepared and registered in the Unified register of tax invoices (hereinafter – TI).
If, before the end of the lease, the leased property becomes the property of another person (lessor 2), then lessor 1 can calculate the adjustment to the TI, made during the receipt of funds to pay for the cost of the lease services, and, accordingly, reduce VAT liabilities only if tenant receives the refung for lease services not provided by lessor 1.
When lessor 1 transfers funds (in the amount of not provided lease services) to lessor 2, there is no reason for the lessor 1 to adjust the VAT liabilities. At the same time, the tenant loses the right to the tax credit for those lease services that were not provided by the lessor 1 (VAT liabilities should be calculated using the mechanism defined in i. 198.5 of the Tax Code of Ukraine; hereinafter – the TCU).
PIT and War Tax
The State Fiscal Service of Ukraine in the individual tax advice “On PIT taxation of food on the principle of “buffet service” No. 87/6/99-00-04-07-03-15/ІПК of September 9, 2019 continues to insist that the cost of catering in the cafes and restaurants that work according to principle buffet service should be included to the taxable income of such individuals. As a result, the controllers want the income tax and the military levy to be charged on the general base. This advice was issued by the tax authorities based on the conclusions contained in judgment of the Donetsk Regional Administrative Court of April 24, 2019 (Case No. 200/1191/19-a).
The SFSU points out that the court supports the view that delegation representatives received income in the form of food, but the company did not enter into appropriate agreements with representatives to obtain such income. In addition, the court also noted that “it is impossible to determine the amount and cost of food individually for each representative of a foreign delegation, taking into account the particularities that arise from the buffet service”.
The impossibility to personalize the revenue received and the inability to calculate the amount of products consumed cannot justify the exemption of the delegation from paying taxes and fees.
In addition, the non-resident individuals, i.e. foreign guests are also subject to the rules on obtaining the registration number of the taxpayer’s registration card.
Unified Social Contribution
The President of Ukraine signed Law of Ukraine “On Amendments to the Tax Code of Ukraine on Introduction of a Single Account to Pay Taxes and Fees, Unifies Social Tax to Mandatory State Social Insurance” No. 190-IX of October 4, 2019. The document has already been published in the official press, and since 2021 it will launch the single account to pay taxes, fees and unified social tax (hereinafter – UST).
The payer taxes via user account will either indicate that he or she may wish to use the single account or refuse to do that. You can change your decision once a quarter.
In order to transfer funds to the single account, the State Tax Service, on a daily basis, except for weekends, holidays and non-business days, will form, sign and send to the Treasury a consolidated register of payments from the single account, indicating the payment details of the recipients and other information required according to the legislation.
The register of payments from the single account for an individual taxpayer will be formed in accordance with:
- tax information contained in the taxpayer's settlement documents for depositing funds into the single account;
- tax information contained in the tax invoices (settlements) submitted by the taxpayer, according to which the due date for payment of tax liabilities has accordingly come, taking into account the data of the submitted clarifying declarations (calculations);
- the information contained in the payers' reports on the UST for which the due date for the payment has come;
- other tax information in accordance with the provisions of the Tax Code of Ukraine (hereinafter – TCU).
The register of single-account payments for a particular taxpayer that has been sent to the Treasury within the consolidated register of single-account payments will become available for viewing by such taxpayer through the user account.
The single account will not be used for payment of monetary liabilities and/or tax debt on value added tax (hereinafter – VAT), excise tax on the sale of fuel and ethyl alcohol, as well as for payment of part of the net profit (income) to the budget by the public and communal unitary companies and their associations.
Accounting and Reporting
The President of Ukraine on September 20, signed Laws “On amendments to the tax code of Ukraine on unshadowing of payments in trade and services” (Draft Law No. 1073) and “On Amendments to the Law of Ukraine “On the use of payment transaction registers in the field of trade, catering and services” concerning unshadowing the payments in the field of trade and services»” (Draft Law No. 1053-1).
They are aimed at protecting legitimate business from unfair competition, eliminating the share of cash payments from the shadow circulation, “gray” goods, improving the efficiency of tax administration and state control over payment transactions.
The implementation of the provisions of the documents will help to increase the overall level of tax culture and consumer protection by gradually expanding the fiscalisation of payment transactions and the introduction of innovative technological solutions in the form of program registrars of payment transactions as an alternative to classic PTRs.
The adopted amendments provide for the possibility of using both classical and program PTR, registration of program PTR via e-cabinet.
The cashback norm will take effect on October 1, 2020. It stipulates that a consumer who has made a purchase in excess of UAH 100 and received a check will be able to check it for authenticity and, if it turns out that the soft copy of payment document is not transmitted to the controlling authorities, to write a complaint on the basis of which a verification of seller can be ordered. If the check confirms that the seller has violated the procedure of payment transactions, he will be fined and 100% of the value of the purchased goods will be returned to the buyer.
Also, from October 1, 2020, a full fine for non-use of PTRs or failure to issue a check (100% of the amount in the case of the first breach and 150% in the case of each subsequent breach), which were previously applied in a limited amount, will apply, and the general rules for the use of the PRT will apply for certain categories of single tax payers of groups II-IV (without limitation of the amount of income for a calendar year), who:
- sell technically complex household goods subject to warranty repair;
- sell medicines, medical products and provide paid health care services;
- sell jewelry and household products made of precious metals, precious stones, precious stones of organogenic formation and semi-precious stones;
- retail second-hand goods in stores;
- conduct restaurants, cafes, fast food restaurants business;
- conduct travel agencies, tourist operators business;
- conduct hotels and similar accommodation business;
- sell textiles, parts and accessories for motor vehicles according to the list approved by the Cabinet of Ministers.
The general rules for the use of PTR for all taxpayers of group II-IV will enter into force on January 1, 2021, simultaneously with the increase of the marginal volume of income for group II of single tax payers from UAH 1.5 to 2.5 million.
The mandatory PRT requirements will not apply to group I of single tax payers.
Control and Responsibility
The President of Ukraine signed the Law “On Amendments to the Law of Ukraine” On Public Procurement “and some other legislative acts of Ukraine on improvement of public procurement” No. 114-IX, which was approved by the Verkhovna Rada of Ukraine on September 19, 2019.
The law is aimed at ensuring efficient, transparent and quality public procurement, prevention of corruption, development of competitive environment and fair competition in public procurement in Ukraine.
The document contains a number of innovations that will help to increase the efficiency of procurement, introduction of personal responsibility for violation of the legislation in the field of procurement, improvement of the mechanism of tenders appeal, harmonization with international standards.
In particular, according to the law, the use of the ProZorro electronic system becomes mandatory for public procurement with a value of UAH 50 thousand (previously the threshold was UAH 200 thousand). This will help bring more than a quarter of a million purchases a year out of the shadows.
The law also obliges the customer to report to ProZorro on all purchases at a cost of 1 kopeck (previously – from UAH 50 thousand).
Those who won tenderer will have 24 hours to correct minor mistakes in the tender proposal. This will allow entrepreneurs not to lose the tender, and the contracting authority – to save the most favorable offer.
The document also introduces a differentiated fee for filing a complaint with the Antimonopoly Committee of Ukraine (hereinafter – AMCU) (through a separate resolution of the Cabinet). This will put an end to the unreasonable appeal of a large number of procurement and delay in tenders. The law also provides for a refund if the complaint of the vendor is satisfied. The cutomer is responsible or failure to comply with the decision of the AMCU and is subject to a fine.
In addition, the law enhances responsibility for the breach of legislation by unfair customers and establishes the personal responsibility of officials. In particular, if goods, works and services are purchased prior to/without procurement, or a contract is concluded prior to/without procurement, then the head of the customer will be fined from 2 to 10 thousand non-taxable minimum incomes.
The law also provides for a tool to combat dumping – the system will indicate an abnormally low price, and the supplier must justify ii to conclude the contract with the customer.
The document also provides new tools for improving procurement efficiency, including ProZorro Market online catalogs and positions of authorized persons for professionalization of procurement.
In addition, the law extends the procurement of medicines and vaccines through international organizations for up to 2 years (until 2022). The Cabinet of Ministers of Ukraine will approve the list of medicines and the procurement procedure.
This law will enter into force on the day following its publication and will be implemented six months after its publication, except for p. VI, which will take effect 12 months after its publication.
Financial Markets
The National Bank of Ukraine in its letter “On consideration of the appeal” No. 57-0007/26039 of May 16, 2019 explained the money transfer mechanism and indicated when the payments are considered cash and when – non-cash.
Different methods can be used to transfer money to the traders’ accounts, in particular:
1) to transfer money from one account to another;
2) to deposit cash for further transfer through the payment devices.
The NBU emphasized that both of these payment options for the recipient of funds are cashless payments.
At the same time, for the payer, the second payment option will be cash.
Labor and Salaries
The State Labor Service of Ukraine has clarified the procedure for dismissing an employee for absenteeism.
The Labor Code of Ukraine in Art. 40 defines absenteeism as a ground for termination of an employment contract with an employee on the initiative of the owner or his authorized body.
At the same time, the Resolution of the Plenum of the Supreme Court of Ukraine “On the Practice of Litigation by Labor Courts” No. 9 of November 6, 1992 discloses the meaning of the concept of “absenteeism” as the absence of an employee at work during the whole working day, or more than three hours continuously or summarily during the working day without good reason.
The labor law does not contain an exhaustive list of reasons that are considered valid. The assessment of the validity of the reason for the absence of an employee at work in each case is provided by the employer, and in case of a labor dispute, by the court.
The reason for the absence of an employee at work can be considered valid if the attendance at work was hindered by material circumstances that could not be eliminated by the employee. According to the case-law, the following can be considered valid:
- fire, flood (other natural disasters);
- accidents or deadtime on transport;
- fulfillment of a civil duty (assistance to the victims of an accident, rescue of public or private property in case of fire, natural disaster);
- care of the sick by a sudden family member;
- absence at work with the permission of the direct manager;
- absence at work due to illness.
Firing for absenteeism is a measure of punishment for breach of discipline. In applying it, it is necessary to comply with the requirements laid down by labor law for applying disciplinary penalties (Art. 149 of the LCU).
The employer applies disciplinary sanction after detection of the misdemeanor, but not later than one month from the day of the discovery, without taking into account the time the employee is excused from work due to temporary disability or being on leave. Disciplinary penalties may not be imposed later than six months after the commission of the offense.
The day of dismissal must be the last day of the employee's work before the day on which he or she took the leave, provided that after his/her absenteeism the employee has no longer shown at work.
On last day of work:
- the full settlement must be made with the employee (Art. 116 of the LCU);
- the employee must be given a properly formed work book (p. 1 of Art. 47 of the LCU) and a copy of the order for dismissal (p. 2 of Art. 47 of the LCU).
You cannot dismiss the employee for absenteeism during his/her absence, given that he/she has not been at work for a long time (for example, more than two weeks) and does not have any information about his/her location and reasons for absenteeism.
In view of Art. 149 of Labor LCU the receiving of written explanations is a prerequisite for disciplinary action. Due to the inability to prove the absence of an employee without good reason, his/her dismissal under i. 4 of Art. 40 of LCU is impossible.
Therefore, in the event of dismissal of the employee due to absenteeism, it is important to follow the dismissal procedure. The employer must bring to the attention of the employees the documents establishing the work responsibilities, working hours, etc., against personal signature, draw up intermediate documents in accordance with the requirements of the law, observe the terms of disciplinary action.
