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Contents
- Ukrainian Government Introduces a Moratorium on Inspections Held by Supervisory Authorities
- The Effectiveness of the Additional 13% Import Duty on Certain Categories of Goods
- Tax Incentives for Euro 2012
- Pension Fund Contributions by "Single Tax Payers"
- Subsidies to Agricultural Manufacturers
- Special VAT Regime Applies to Toll Manufacturing
- Changes to the Amount of Allowable Expenses for Business Trips Abroad
- Increase in Excise Duty on Alcohol and Diesel Fuels
- Increase in Excise Duty on Beer and Wine
- Recognition of Taxable Income from Export if a Dispatch is the First Event
- VAT on Return of Leased Assets
- Deductibility of VAT on Car Purchases
- Ministry of Finance Recognizes a Copy of an Electronic Air Ticket as a Primary Document
- Recognition of Royalties Paid to a Non-Resident Related Party as Deductable Expenses
- Minimum Wage Increase
1. Ukrainian Government Introduces a Moratorium on Inspections Held by Supervisory Authorities
On 21 May 2009 the Cabinet of Ministers passed resolution No. 502 "On Temporary Limitations of State Control over Commercial Activities until 31 December 2010". The resolution introduces a temporary moratorium on the following actions until 31 December 2010:
- All scheduled audits of business entities, except for scheduled audits of high risk entities and scheduled tax audits.
- Unscheduled audits, except for cases in which such audits are requested by the business entities or upon receipt of a complaint in respect of such entities.
If supervisory authorities discover violations of laws during such inspections, they may request that such violations be rectified within the next 30 days. The authorities may apply financial and administrative penalties only if the request has been ignored.
2. The Effectiveness of the Additional 13% Import Duty on Certain Categories of Goods
On 23 June 2009 the Ukrainian Constitutional Court passed decision No. 15- pп/2009 on the unlawfulness of the provisions of the law "On Ukrainian Customs Tariffs" giving the Cabinet of Ministers the right to cut (or change) the temporary additional import duty. The Constitutional Court's decision allows only the parliament to establish and cut state taxes and duties (mandatory payments), including import duties and temporary additional import duties.
As a result, the cabinet's resolution to cancel the 13% import duty for certain categories of goods (except for cars and refrigerators), dated 18 March 2009, may be terminated (albeit it is still in force) and the 13% import duty made to apply to a wide range of goods (e.g., meat, wine and ethyl spirit).
By way of reminder, the temporary 13% import duty was introduced for certain categories of goods by the law "On Amending Certain Legislative Acts with a view to Improving the Ukrainian Payment Balance in Connection with the World Financial Crisis" which became effective on 7 March 2009.
3. Tax Incentives for Euro 2012
On 5 June 2009 the Ukrainian parliament passed the law "On Amending the Law of Ukraine 'On the Organization and Staging of the Final Part of the European Football Championship 2012 in Ukraine' and Other Legislative Acts of Ukraine".
The law sets out the following tax incentives in connection with the European Football Championship 2012:
- Import customs duty exemption (until 1 September 2012) for goods (except for goods subject to excise duty) to be used in the construction and fitting out of sports buildings for EURO 2012, provided that such goods are not produced in Ukraine or, if produced in Ukraine, do not comply with international technical standards and the requirements of international sports organizations.
- Import VAT exemption for goods (capital assets) received by UEFA in Ukraine and corporate profit tax exemption for profits generated by UEFA from its activities in Ukraine, including income derived from the sale of commercial and marketing rights.
- Personal income tax exemption for wages, compensation and per-diem allowances received by UEFA members' representatives and employees, official delegation and team members and individuals accredited by UEFA. This exemption does not cover Ukrainian residents.
4. Pension Fund Contributions by "Single Tax Payers"
On 14 April 2009 the Cabinet of Ministers passed resolution No. 505 "On Mandatory State Pension Contributions Paid by Individual Entrepreneurs Subject to the Special Tax Regime". The resolution became effective on 1 May 2009. Under the resolution, individual entrepreneurs who apply the special tax regime (single tax payers) must pay monthly pension fund contributions not less than the minimal insurance contribution per person (from 1 July it will be UAH209.16), including part of the single tax paid to the pension fund.
The resolution appears to be questionable vis-à-vis the presidential decree "On Simplified Taxation Regime" which provides that individual entrepreneurs subject to the special tax regime (single tax payers) are not liable to pay mandatory pension contributions. We are aware that the resolution is currently being disputed by taxpayers in the administrative courts.
5. Subsidies to Agricultural Manufacturers
On 4 February 2009 the Ukrainian parliament passed the law "On Amending Certain Legislative Acts of Ukraine for the Prevention of the Negative Effects of the World Financial Crisis on the Development of the Agricultural Sector". In particular, the law amends the law "On Value Added Tax" requiring the VAT to be paid by processing enterprises to the state budget for milk and meat products sold to be subsidized to agricultural manufacturers selling meat and milk to the processing enterprises.
6. Special VAT Regime Applies to Toll Manufacturing
On 21 May 2009 the Ukrainian parliament passed the law "On Amending the Law of Ukraine 'On Value Added Tax' (on the special VAT regime for agricultural manufacturers for the sale of produce)". The law provides for a special VAT regime for agricultural enterprises manufacturing goods on toll conditions.
7. Changes to the Amount of Allowable Expenses for Business Trips Abroad
On 20 May 2009 the Cabinet of Ministers passed the resolution "On Amending the Resolution of the Cabinet of Ministers 'On Norms of Allowable Expenses for Business Trips Within Ukraine and Abroad'". The resolution provides for the following allowable expenses for business trips abroad:
- UAH equivalent of USD50 a day as an advance payment if the cost of living does not include meals;
- UAH equivalent of USD40 a day as an advance payment if the cost of living includes 1 meal a day;
- UAH equivalent of USD27.5 a day as an advance payment if the cost of living includes 2 meals a day; and
- UAH equivalent of USD17.5 a day as an advance payment if the cost of living includes 3 meals a day.
8. Increase in Excise Duty on Alcohol and Diesel Fuels
On 31 March 2009 the Ukrainian parliament passed the law "On Amending Certain Legislative Acts of Ukraine Relating to Excise Duty Issues". The law provides for an increase in excise duty rates on alcohol and diesel fuel. In particular, excise duty on sparkling wine will increase from UAH1.6 to UAH2.5 per litre. The excise duty rate on diesel fuel with a sulphur content higher than 0.2 % will increase from EUR45 to EUR65 for 1000 kg. The new excise duty rate on alcohol will be effective from 1 July 2009 and on diesel fuel from 1 November 2009.
9. Increase in Excise Duty on Beer and Wine
On 23 June 2009 the Ukrainian parliament passed the law "On Amending the Law 'On the 2009 State Budget of Ukraine' and Certain Legislative Acts" (taking into account the president's suggestions). In particular, the law provides for an increase in the excise duty rate on wine from UAH0.01 to UAH0.25 per litre. The excise duty rate on malt beer will increase from UAH0.34 to UAH0.60 per litre starting from 1 July 2009.
10. Recognition of Taxable Income from Export if a Dispatch is the First Event
On 17 April 2009 the State Tax Administration of Ukraine issued letter No. 8165/7/15-0217 regarding the corporate profit tax accounting in respect of the export of goods when the first event is a dispatch of goods (and not the receipt of money). Thus, if the first event is a dispatch of goods for export, the gross (taxable) income of a taxpayer is calculated at the official exchange rate on the date of the dispatch and is not subject to recalculation within the reporting period. At the same time, upon receiving foreign currency a taxpayer must calculate a value for such currency at the official exchange rate on the date of dispatch and such value is subject to recalculation under Section 7.3.3 of the Corporate Profit Tax Law if the official exchange rate changes.
11. VAT on Return of Leased Assets
On 6 February 2009 the State Tax Administration of Ukraine issued letter No. 982/6/16-1515-26 regarding the application of VAT on the return of leased assets under financial lease terms, due to a failure to make lease payments. The letter says that the return of leased assets (for example, in case of a breach of the agreement prior to its termination) is subject to VAT. In other words, the lessee must charge VAT upon returning leased assets to the lessor.
12. Deductibility of VAT on Car Purchases
On 3 February 2009 the Higher Administrative Court reached a decision on case No. К-6951/07 regarding the deductibility of VAT on car purchases. The Higher Administrative Court has recognized in its decision the right of a taxpayer to deduct VAT on a car purchase for corporate profit tax purposes.
Please note that tax authorities have recently adopted a purely fiscal approach to this matter (that is to say, VAT on car purchases was not included in the tax credit, was not treated as a deductible expense and was not subject to depreciation). The above decision provides further grounds for taxpayers to argue for the deduction of VAT on car purchases.
13. Ministry of Finance Recognizes a Copy of an Electronic Air Ticket as a Primary Document
On 23 April 2009 the Ministry of Finance issued letter No. 31-34000-10-9/11608, which recognizes a copy of an electronic ticket as being a primary document for tax accounting purposes.
14. Recognition of Royalties Paid to a Non-Resident Related Party as Deductable Expenses
On 11 March 2009 the State Tax Administration issued letter No. 4516/7/15- 0217 regarding the moment for recognition of royalties paid to a non-resident related party as deductible expenses. In its letter, the tax authority concludes that the taxpayer is allowed to treat royalties as deductable expenses only after the occurrence of two events: i) the actual royalty payment; and ii) the factual receipt of the results of such services from the non-resident (i.e., the date when the document evidencing provision of such services is signed).
In our view, this approach is legally debatable in the context of the rules established by Section 11.2 of the Corporate Profit Tax Law regarding recognition of deductible expenses.
15. Minimum Wage Increase
From 1 July 2009, the minimum wage will be increased UAH625 to UAH630 per month.
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