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TAX ALERT 16.07.2018

LEGAL HOTLINE . 16 July 2018

The latest TAX news for your attention:

Contacts

Iryna Kalnytska

Partner, Head of tax practice, Attorney at law

No explanations or copies of documents have to be provided in the event of suspension a registration of erroneously drafted tax invoice

The State Fiscal Service of Ukraine (hereinafter the “SFS of Ukraine”) has explained (the information has been published in the Public Information and Reference Resource, sub-category 101.17) that a taxpayer does not have to submit the documents necessary to take a decision on registration with the Unified Register of Tax Invoices (hereinafter the “ERPN”) of the excessively (erroneously) drafted tax invoice/adjustment calculation as there are no primary documents on supply of goods/services in case a tax invoice/adjustment calculation is drafted excessively (erroneously).

The SFS of Ukraine has emphasised that in such cases a tax payer can only submit written explanations on the excessively (erroneously) drafted tax invoice/adjustment calculation.

To our mind, this conclusion of the SFS of Ukraine is legitimate and consistent with the established practice of the tax authorities.

Thus, in its individual tax advice No. 2095/6/99-99-15-03-02-15/IPK dated 3 November, 2017, the SFS of Ukraine stated that volumes of supply of goods/services and VAT amounts set out in the erroneous tax invoices and adjustment calculations thereto are not to be presented in the VAT declaration as taxpayers may not form data of tax reportings and customs declarations on the basis of the data not confirmed by the documents listed in Paragraph 1 of Clause 44.1 of Article 44 of the Tax Code of Ukraine.

Issues of blocking of tax invoices are getting relevant again

The fiscal authorities have recently provided a number of new explanations-reminders to taxpayers regarding submission of documents in order to unblock tax invoices/adjustment calculations, namely regarding the following.

In its letter dated 9 July, 2018, the Main Department of the State Fiscal Service in Kyiv reminded that VAT payers may submit one package of documents on several blocked tax invoices/adjustment calculations provided that: such tax invoices/adjustment calculations are drafted with regard to the same recipient and VAT payer, under the same agreement; or such tax invoices/adjustment calculations contain the same type transactions (with the same commodity codes under the Ukrainian Classification of Commodities for Foreign Economic Activity (UKT ZED) or service codes under the State Classification of Products and Services (DKPP)).

The terms and form of submission of the “unblocking” package of documents (written explanations and copies of documents) have not changed: they are submitted within 365 calendar days upon the date when the blocked tax invoice/adjustment calculation was drafted, by electronic communication means prescribed by the SFS of Ukraine.

In its turn, the SFS of Ukraine has informed (the information has been published in the Public Information and Reference Resource, sub-category 101.17) that in case registration of the tax invoice/adjustment calculation is terminated, the taxpayer does not have to certify copies of the documents necessary to take a decision on registration of the tax invoice/adjustment calculation as such documents are submitted as scanned PDF copies, as separate annexes to the notice of submission of the documents on confirmation of the real transactions, with the respective electronic digital signature of the signatory (signatories) and electronic seal.

The given conclusion of the SFS of Ukraine is unconditionally grounded and releases taxpayers from the need of “double” certification of the same documents.

Exit capital tax will be introduced, but the date is unknown

On 5 July, 2018, Draft Law No. 8557 on introduction of the exit capital tax submitted by the President of Ukraine was registered with the Verkhovna Rada of Ukraine.

According to the Draft Law, the exit capital tax will replace the income tax starting from 1 January, 2019.

We would like to remind that the idea of the exit capital tax is that taxation of income is deferred until it is allocated as dividends (equivalent payments).

The object taxable with the exit capital tax is capital withdrawal transactions and their equivalents.

The following exit capital tax rates are proposed:

  • 15 % – to the capital withdrawal transactions (payment of dividends);
  • 20 % – to the transactions equivalent to the capital withdrawal transactions (interest paid to the related non-residents and non-residents registered within the countries being low-tax jurisdictions etc.);
  • 5 % – to the funds paid to fulfil financial obligations to the related non-residents.

Moreover, pay attention to the fact that allocation of dividends among legal entities being exit capital tax payers is not subject to this tax.

In its turn, the International Monetary Fund (hereinafter the “IMF”) objected to submission of the Draft Law on the exit capital tax to the Verkhovna Rada of Ukraine as it supposes that introduction of the law will cause considerable reduction of state budget proceeds (the information has been published at https://www.epravda.com.ua/news/2018/03/13/634916/).

Instead, the President of Ukraine claimed that introduction of the exit capital tax does not contravene any IMF’s requirements as the respective Law will only enter into force when the budget will provide for respective compensation facilities (the information has been published at http://www.president.gov.ua/news/prezident-vnosit-do-parlamentu-proekt-zakonu-pro-podatok-na-48486).

Therefore, despite the positive nature of the exit capital tax for business, it is not likely to be introduced in the near future.

If the person’s rights to the land plot are not registered, no land tax shall be paid

The Ministry of Finance of Ukraine approved the Consolidating Tax Advice on Some Issues of the Land Tax with its Order No. 602 dated 6 July, 2018.

In the Consolidating Tax Advice on payment of the land tax by the owner of the real property located on the land plot the person’s rights to which have not been registered, it is stated that this person may not be deemed a land tax payer in the meaning of Article 269 of the Tax Code of Ukraine until the person’s respective rights to the land plot are registered on the basis of the entry made in the State Land Cadastre as prescribed by the law. This person does not have to pay the land tax until then, in accordance with the Tax Code of Ukraine.

In particular, this opinion is based on the fact that land owners and users pay land tax for the land upon the date of creation of the title to or right of use of the land plot (Clause 287.1 of Article 287 of the Tax Code of Ukraine).

Moreover, the title to the land plot as well as the right of continuous usage and right of lease of the land plot are created from the date of state registration thereof (Article 125 of the Land Code of Ukraine).

The land tax is accrued on the basis of the data in the State Land Cadastre (Clause 286.1 of Article 286 of the Tax Code of Ukraine).

The similar conclusion was stated in Letter of the Interregional Main Department of the State Fiscal Service – Central Office for Servicing Large Payers No. 9801/10/28-10-01-03-1 dated 29 April, 2016.

It should be noted that the given Consolidating Tax Advice does not give an absolute answer to the question, “Does the person that has acquired the title to (right of use of) the land plot ‘automatically’, in connection with acquisition of the right to the house, building, construction in accordance with Article 120 of the Land Code of Ukraine has to pay the land tax?”

In this regard, the Supreme Court of Ukraine has expressed the opinions (Resolutions dated 8 June, 2016, in case No. 21-804а16 and dated 12 September, 2017, in case No. 2а-10596/12/2670) that transfer of the title to (right of use of) the land plot, according to Article 120 of the Land Code of Ukraine, creates the obligation to pay the land tax regardless of registration of the title to (right of use of) the land plot.

Despite the opposite nature of the given opinions, we hope that the consolidating tax advice will promote development of the well-established and unambiguous law enforcement practice.

The unified social tax report for employers has been updated

Order of the Ministry of Finance of Ukraine “On Amending the Procedure for Formation and Submission of the Report on the Amounts of the Accrued Unified Fee for Compulsory State Social Insurance” No. 511 dated 15 May, 2018, is entering into force on 1 August, 2018.

According to the given Order, the unified social tax report is changed.

The accounted number of regular employees will be indicated in the headline part of Table 1 in the unified social tax report, in item 15, instead of the headcount.

The headcount provided for the need to set out in the given table the employees with whom the employment agreement (contract) has been executed in accordance with the approved list of positions containing the fixed salary for each specific position, as of the first day of the reporting period.

Instead, the accounted number of regular employees includes all the employees that have entered into a written employment agreement (contract) and performed permanent, temporary or seasonal work for one day or more as well as owners of the enterprise if they have received a salary there in addition to income. The accounted number of regular employees is determined as of the specific date of the reporting period. But it is not known as of which date this indicator shall be calculated for the purposes of the unified social tax report.

Also, Table 1 will contain new lines for the difference between the actual accrued amount of the unified social tax for persons with disabilities at the beneficial rate (8.41 %, 5.3 %, 5.5 %) and the common rate (22 %). However, it is not stated in the Order how these lines are to be filled in.
New columns have been added to Table 5: in addition to information on employment and dismissal of employees, their child care leaves, it is also necessary to enter data on transfer to another position or change of the name of the position.

Taking into consideration some ambiguities related to practical implementation of the given changes, relevant explanations should be given by the SFS authorities.

Primary documents shall be drawn up in Ukraine

The SFS of Ukraine has explained (the information has been published in the Public Information and Reference Resource, sub-category 102.21) that according to Parts 1 and 2 of Article 9 of the Law of Ukraine “On Accounting and Financial Reporting”, a basis for accounting economic transactions is primary documents.

According to Clause 1.3 of Regulations on Documental Support of Accounting Entries No. 88 approved by Order of the Ministry of Finance of Ukraine No. 88 dated 24 May, 1995, all primary documents, accounting registers, accounting and other reports shall be drawn up in Ukrainian. In their turn, the documents being a basis for accounting records and drawn up in a foreign language shall be accompanied by the orderly authentic translation into the given language.

New accounts for tax payment will start working after 11 September 2018

In order to avoid budget losses and due to change of accounts, the transitional period has been introduced for the accounts until 11 September, 2018.

During this period, the old accounts for payments to the state and local budgets remain in effect.

All taxes and levies paid to the old accounts are not lost or returned and do not require additional efforts for redirection thereof; instead, they are accepted in accordance with the purpose of payment and budget laws.

During the transitional period (until 11 September, 2018), transactions on both old and new accounts are carried out as usual.

Besides, the accounts for the unified social tax did not change on 2 July, 2018.

This information has been published on the Facebook page of the State Treasury Service of Ukraine at (https://m.facebook.com/story.php?story_fbid=985941794899252&id=483923041767799).

Submission of transfer pricing reports for 2017

In its letter dated 9 July, 2018, the Office of Large Taxpayers of the State Fiscal Service reminded that starting from 1 January, 2017, in accordance with the changes introduced by the Law of Ukraine “On Amending the Tax Code of Ukraine Regarding Improvement of the Investment Environment in Ukraine” dated 21 December, 2016, the deadline for submitting the Controlled Transactions Report is until 1 October of the year following the reporting one.

As the deadline for submission of the Controlled Transaction Reports for the reporting year of 2017 (30 September, 2018) is the day off (Sunday), taxpayers shall submit the report not later than on 1 October, 2018.

Contrary to the tax return, the Controlled Transactions Report is only submitted in electronic copy by electronic communication means, in accordance with the law on electronic document flow and electronic digital signature (Sub-clause 39.4.2 of Clause 39.4 of Article 39 of the Tax Code).

Moreover, the tax authorities draw attention to the fact that, taking into consideration the special aspects of electronic document flow, taxpayers should ensure timely submission of the Controlled Transactions Report in advance, to be able to take measures to resolve any issues if it is not accepted for any technical or force majeure reasons, before the deadline for submission of the Controlled Transactions Report.

The template of the Controlled Transactions Report and the procedure for drawing it up have remained unchanged, the same as when submitting reports on transfer pricing for 2016 (approved by Order of the Ministry of Finance of Ukraine No. 8 dated 18 January, 2016).

The report is composed of the headline and principal parts, annex and information on the annexes forming an integral part thereof and containing data on the parties to the controlled transactions and detailed data on the controlled transactions. It is filled in separately for each party to the controlled transactions. The quantity of annexes to the report shall conform to the number of contracting parties being parties to the controlled transactions set out in the principal part of the report.

Information on being related is indicated in the established form, which shall contain the number of the annex to which it is attached, and data on the taxpayer and its contracting party are stated repeatedly.

The tax authorities also note that in case of indirect possession of equity rights, the entire chain of the parties (with indication of their name, country of registration and code of the party) via which such indirect possession is carried out shall be disclosed.

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