18 November 2011 The President of Ukraine signed the Law “On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine (on a simplified system of taxation, accounting and reporting). Notably, Article 291.5.1 of the Draft Law stipulates that insurance agents are subject to simplified taxation system and shall pay 5% of the income received. Besides, the Law on a simplified taxation system renders the right of legal persons to include the payments carried out to private entrepreneurs into gross expenditures.
Background: On 16 May 2011 the Draft Law on a simplified taxation system was registered in the Verkhovna Rada of Ukraine. For that moment this Draft Law envisaged that insurance agents were not liable to use simplified taxation system, since their activity is treated as the one widely used by business to minimise costs.
But it is worth mentioning that insurance activity implicates to a great extent the assistance of insurance agents, which serve and consulate clients, support them with documentation etc. World and European practices demonstrate that insurance agents’ activity is paid for as commission rather that establishment of labour relations.
EBA Life Insurance Committee had been advocating the right of insurance agents to enjoy simplified taxation system for a long time already. As a result of EBA lobbying the favourable provisions were included into the Tax Code of Ukraine. Draft Law No. 8521 was finally adopted by Verkhovna Rada of Ukraine on 4 November 2011, signed 18 November 2011 by the President of Ukraine and will become effective as of 1 January 2012.
We would like to thank EBA Life Insurance Committee members who significantly contributed to this initiative and we hope that life insurance market will be supported by state authorities for further development in the future.
The EBA will continue to advocate further improvement of the Tax Code and we will keep you updated respectively.