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Legislation digest

Rimma Medvedeva
tax consultant



1.1. CTEA-2005 validity extended until December 31, 2013

Ministry of Economic Development and Trade of Ukraine in Order dated 07.02.2013 № 113 extended validity of SC 009:2005 "Classification of types of economic activities” until December 31, 2013.

As you know, once by the Order of State Consumption Standard "On approval and cancellation of national classificatory" from 10.11.2010, № 457 a new national classificatory of Ukraine SC 009:2010 "Classification of types of Economic Activities" was approved, which entered into force on January 1, 2012. Also, this order canceled the previous one – SC 009:2005, on December 31, 2012.

In this regard, during 2012 entities were forced to re-register documents with codes of economic activity, including new codes under SC 009:2010. For those businesses who did not have time to do this, above-mentioned order will be good news.

1.2. About ratification of the Protocol amending the Convention on Mutual Administrative Assistance in Tax Matters

VRU by Law of Ukraine from 11.01.2013 № 21-VII ratified the Protocol amending the Convention on Mutual Administrative Assistance in Tax Matters. In particular, modified list of types of assistance that the requested State is not obliged to provide, is supplied. Assistance related to discrimination between nationals of the requested and requesting states, who are in the same situation, is clarified. It is stated that worsening conditions for the citizens of requested state is not allowed.

Types of assistance added:

- If requesting State has failed to take all reasonable steps in accordance with its laws or administrative practice, except when such measures lead to undue hardship;

- In recovery in cases where administrative burden for requested state clearly exceeds benefits, which requesting state can get.

1.3. About amendments to Order of the Ministry of Finance of Ukraine on November 25, 2011 № 1492

Minfin in Order from 17.12.2012, # 1342 put a new version of VAT reporting form. As planned, single declaration form provided for:

- Simple payer;

- Special regime for agriculture;

- Special regime in field of forestry;

- Special regime in fisheries;

- Agricultural enterprise that did not chose special regime;

- Special regime for processing enterprise.

New forms came into force from 05.02.2013

1.4. New Law on Charity and Charitable Organizations

Important news for philanthropists, charitable, philanthropic organizations and recipients of charity! The President signed the Law of Ukraine "On Charity and Charitable Organizations" from 05.07.2012, № 5073-VI (hereinafter - the Law #5073). It defines general principles of charity in our country, provides legal regulation of social relations, aimed at charity development, approval of humanism and compassion, favorable conditions for establishment and activities of charitable organizations.

This law was enforced on February 3, 2013 (published in Voice of Ukraine № 22 from 02.02.2013).

Accordingly, previous Law of Ukraine "On Charity and Charitable Organizations" from 16.09.1997, № 531/97-VR lost its validity. It is important that legislators stressed: due to enactment of Law # 5073, charitable organizations’ re-registration before this date is not required.

However due to adoption of the Law # 5073 necessary adjustments have been made for certain standards - in particular, the Tax Code of Ukraine and the Law "On state registration of legal entities and individual entrepreneurs" from 15.05.2003 № 755-IV.


2.1. About advance payments of income tax reflection in accounting

MinFin said the following while considering order of representation advance payments of income tax in accounting for payers, who provide annual declaration, in Letter from 24.01.2013, the № 31-08410-06-52297.

Accounting for taxes (income tax, VAT, etc.) maintained in account 64 "Settlements on taxes and charges", where at individual sub-accounts’ balance at the end of month there can be not only credit, but debit as well. These figures are not offset, and synthetic account balance is determined expanded on debit and credit as sum of corresponding on sub-accounts.

Thus, advanced payments for income tax are credited on account 31 "Accounts in banks” and debited at analytical account of income tax 64 "Settlements on taxes and charges". During the year, debit balance for analytical account of income tax is shown in balance sheet in item "Receivables on settlements with budget".

At the end of year tax liability on income are credited at analytical account of tax prybutok64 "Calculations on taxes and charges" and charged to 98 "Income Tax." Credit balance at the appropriate analytical account be transferred to the budget.

2.2. About providing payments of customs duties

Customs Service in Letter from 21.01.2013, № 11.1/1.2-15.1/592-EP noted that granting customs authorities ensuring of payments of customs duties is required when importing to Ukraine or moving passage through its territory and internal transit of goods from list, approved by CMU. In case of import into customs territory of Ukraine the excisable goods, including raw tobacco, obligations to pay customs duties is provided for customs authorities with guarantees.

Sum of financial guarantees is determined by customs authorities basing on amount of customs duties to be paid by release of goods for free circulation on territory of Ukraine or when exporting goods abroad.

Importing to Ukraine excisable goods to manufacture excisable products on which excise tax is paid, or sale for export upon presentation license to manufacture (except oil products) to customs authorities is exempted from excise.

Whereas, in case of importing goods in Ukraine the obligation to pay customs duties arises upon their actual movement, provided documentary proof of exemption from taxation (license for production), amount of payment is calculated basing on amount of taxes payable upon release of goods for free circulation.


3.1. About eliminate some contradictions in TCU

 A bill from 17.01.2013, № 2034, which provides for the following modifications to eliminate a number of contradictions:

- Abolition of duty for tax accounting differences, because they are not involved in calculation of taxes;

- Improved repayment of advance payments for income tax in order to eliminate ambiguities that STSU abuse for forcing taxpayers to increase taxes. One of such contentious issues concerns basis for advance payments calculation, which, according to tax agency, includes advanced fees from dividends. Another conflict is associated with STSU protest against possibility of advance fees cancellation by using an overpayment of income tax;

- Establishing financial responsibility for seller, who has not fulfilled his obligation to register the tax bill in Single register of tax invoices (SRTI), as a result buyer loses right for tax credit and goes under risk of incurring unscheduled inspection;

- Change in PIT taxing for transactions with investment assets under which tax agent has possibility to calculate profit only on investment assets which he operates with, while TCU requires taxing financial result on transactions with all investment assets in general;

- Exclusion of "currency book value" and simplifying accounting of foreign currency sales;

- Exemption from income tax for transfer transactions between taxpayer and his separate departments not only for gratuitous financial help, but also for any kind of goods and services;

- Exclusion of reference to warranty repair procedure of technically complex appliances to take off restrictions on expenditure for warranty implementation;

- Abolition of the 10-year term of useful life for intangible asset rights in absence of such term in constitutive documents;

- Clarifying certain nuances on tax authorities’ reviews. For example, providing tax agent an opportunity to explain before being checked under cavil about tax evasion salaries, eliminating possibility of failure to submit original documents related to subject of review;

- Abolition of 75 percent penalty on tax agents for non-paying tax on income by taxpayers.

4. Misc

4.1. How long will take a new procedure of real estate transactions compilation

From the first day of 2013 Ukrainians do not need to communicate with BTI. For registration of estate transactions it is enough to contact notary, who will submit necessary data to the State property rights on real estate register, then buyer becomes an owner.

Nearly every resident of Ukraine once in life has faced with need of re-issuance ownership rights on real estate. Many of us have inherited an apartment; someone becomes home owner in new neighborhood, some was happy to buy a country house in beautiful location. Thus for many square meters purchasing is associated with prolonged and troublesome procedure of ownership registration. With lines at BTI, starting at particular cabinet door and ending outside the building. In a few weeks, and in some cases, months of life spent on various documents issuing, which later enable to entitle proudly as owner.

Now, one can remind as a nightmare about ten circles of ownership registration for real estate in BTI, from January 1, 2013, when real estate transactions registration is carried out under simplified procedure.

Until recently, person who bought an apartment or a house, had at first to contact notary for signing the sale contract (in this case collecting package of documents by seller, required for notarization of contract, is prior to signing contract), then notary testified and recorded agreement in State Register of Legal Actions. After that, buyer had to register his ownership in the BTI. We should note that Ukraine is almost the only country in Europe where there is such double registry.

Under ideal conditions it will be possible to register real estate ownership within an hour (but only if object has already been registered in the State register of real estate rights to immovable property). Previously this process took no less than a week.

Also the cost for processing transactions with real estate is reduced. After all, according to a new procedure, for title registration notary requires extracts from two state registers, and not three, as it was until January 1. Thus, amount of costs for obtaining extracts from registers can be reduced by 30 percent.

But despite obvious advantages of new procedure of property rights registration, some perceive it as hostile. Moreover, they believe that now registering ownership for apartment or cottage will be complicated and expensive.

Such assumptions of people have not come out of nowhere. This information was massively disseminated by persons, who work in real estate or were previously involved in current registration system and who would like to encourage people to re-register property ownership before New Year. This is partly connected with the fact that even now destiny of one of required procedures for real estate sales - technical inventory, is not clear. Its cancellation eliminates for some individuals many opportunities to earn.

Some notaries play into the hands of BTI, they claim that in the next three or four months property market will collapse. Such statements are hardly true. Many notaries also want to get more benefit from situation, overstating value of their services. Also, they obviously do not want to take on additional responsibilities associated with property ownership registration under new procedure.

However property owners should remember that ownership rights registration last year does not exempt them from having to register in the State register of real estate rights in future when transactions with real estate is needed. "Urgent" ownership rights registration before New Year was meaningful only if property was not registered in the Register of real estate ownership rights, which was valid during that time.

Simplified registration of ownership has a positive impact on market. According to the Ministry of Justice, during first half of 2012 notaries had certify about 177 thousand contracts of sale of apartments and homes, which is by 2% more than number of transactions in same period in 2011. Thus every tenth agreement was signed in the capital of Ukraine.

Also in the first half of 2012 579 thousand contracts of sale of land was notarized. Increase compared to the same period in last year was by 8.5%.

Yet, as in every coin has another side. From New Year the abolition of compulsory procedures of technical inventory for real estate, but in simple terms, no mandatory requirement to conduct ongoing review of real estate before exclusion to identify illegal redevelopment can cause misuse. And when buying new meters under simplified procedure, one can not only become owner of illegal housing redevelopment, but also obtain duty to coordinate improvements made by previous holder.

4.2. In January and February old VAT declarations are used

STS in Kiev drew attention to the fact that reporting of VAT in January and February 2013 is taxable under old form approved by Order of the Ministry of Finance from 25.11.2011, № 1492, and results for March 2013 and later periods- under new form approved by the Order of the Ministry of Finance from 17.12.2012, № 1342. We remind that these terms correspond to order established by § 46.6 TCU.

However, issue is not completely settled: tax officers paid little attention to quarterly VAT payers. Perhaps this nuance seemed premature for tax department, since last days of quarterly declaration submission, which have not even started yet, are very far, but we will not leave this category of taxpayers in the dark.

As the letter states that new form is used for March, ie from April 1, and from that same date statement for first quarter begins submitted, though it can be assumed that tax authorities will demand new forms of declarations already in first quarter.

However, January and February are in first quarter, according to which, as tax officials mentioned, one should report with the old form.

The task is not easy. In general, one could use § 46.6 of TCU, which itself is not entirely clear, but in conjunction with presumption of legality of taxpayer, quite convincingly justifies application of new declaration, starting with reporting for second quarter. Recently, however, it is unfashionable to justify own actions, especially in matters concerning accounting, with TCU standards. So let’s try using more relevant arguments.

When thinking democratically, that is the overriding principle of majority rule in our country; it appears that the first quarter is made up of 2/3 of period declared by old form, and only 1/3 of period declared by new form. So the old form is winning.

P. S. TCU clearly lacks rules that reporting forms, procedures and deadlines for their submission should be defined in letters of central authority that makes tax policy.

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