Consolidated Payroll Taxes Reporting 2021: Will Canceling Monthly Reports Make Life Easier for Accountants?

15/ 04/ 2021

Natalia Kholmogorova. Tax Expert at Accountor Ukraine For a year and a half, legislators have been developing a transition to consolidated payroll taxes reporting. Eventually, new way of reporting was approved by Order of the Ministry of Finance # 773 of Dec 15, 2020. The new method has combined two elements: The Unified Social Contribution report under Form Д4, and the 1ДФ Form. The consolidated reporting method is called Tax calculation of the amounts of income accrued (paid) in favor of taxpayers - individuals, and the amounts of tax withheld from them, as well as the amounts of the accrued unified contribution (hereinafter - the Calculation). Accountor Ukraine recommends: Companies shall start reporting under the new method from Q1 2021, and the reports are to be filed till May 11, 2021. The calculation in UAH with kopecks must be filed to local tax office at the main place of registration. It should be submitted separately for each quarter (tax period), with details for each month of the reporting quarter within 40 calendar days following the last calendar day of the reporting quarter, only in case of accrual of income to the taxpayer during the reporting period. The Calculation Form consists of the title part, which must indicate information about the employer, the employees (other individuals - taxpayers) as well as the contents of the Calculation, and the main (calculation) table which consists of three sections and six appendices. The Unified Social Contribution data must be reflected in the main part of the Calculation (which is similar to the old Table 1 of the monthly report), in Appendix 1 (which is based on the old Table 6), where data from the main part (the employees, the months when these amounts and the USC amounts were accrued) must be deciphered; and in Appendix 5 (previously Table 5), where HR changes must be indicated. The tax agent must reflect the Personal Income Tax and the Military Fee in Appendix 4ДФ (based on the old 1ДФ report), which only has 3 types (Reporting, New Reporting and Clarification). Below are the most interesting changes in the Calculation: 1) The main part of the Calculation now offers not three, but four types. Apart from the standard three types (Reporting, New Reporting and Clarification), you can also choose the “Information” type. The Calculations identified as “Information” must be filed by payers of the Unified Social Contribution not for the sake of fixing the obligation, but for the purpose of informing about individual incomes of the insured persons, accrued in certain months outside the reporting period. Here are some practical explanations of the Pension Fund of Ukraine on how to fill in the “Information” type calculation: If the employee retires, the Information Calculation must be filed after the employee submits the application letter for the appointment of pension. In this case, the employer shall learn about the need to fill in the Calculation either from the Pension Fund or from the employee; If the employee applies for sick leave/maternity leave, the information must be filed either before or along with submission of the Calculation Application to the Social Security Fund, since within 10 working days after the receipt of the calculation application, the SSF must check the data of the insured in the State Register of Compulsory State Social Insurance, as well as check the data on USC payments and the correctness of accruals; The employers will be filing Information Calculations for employees who have had insurable events from February 1, 2021; If you have already submitted certain data for some employees for certain months in the Information Calculation, this fact does not relieve you of the obligation to provide data about them in the Reporting Calculation. Any other type of Calculation will be deemed as valid except for the Information Calculation (that is why there are no strict deadlines for filing this type of Calculation, and there will be no penalties for failing to meet those deadlines!). 2) From now on, the legal successors of liquidated tax agents can file the Clarification form. For this purpose, line 034 was added to the main part of the report, where the assignee can indicate the tax number of the predecessor, on whose behalf the Clarification is submitted. 3) If a legal entity has affiliates (separate subdivisions), there are two options for submitting the report: either the affiliate reports independently, or the parent company reports both for themselves and for the affiliate. 4) The data on the amount of Personal Income Tax and Military Fee withheld and paid to state budget shall be indicated on monthly basis with details for each individual and for each type of income. 5) Wages paid within the established deadlines in the next month must be shown in the 4ДФ form for which the wages were accrued - the previous month. 6) For each individual, the Unified Social Contribution data must be filled in for each reporting quarter for each three months in the relevant lines (each of the lines also has three cells), whereas data on Personal Income Tax and Military Fee must be reflected in the three 4ДФ appendices. Meanwhile, the Pension Fund of Ukraine emphasizes that the consolidation of Personal Income Tax and Unified Social Contribution reporting and the establishment of a quarterly reporting period contains risks of causing payment delays and delays in providing relevant data to the Register of insured persons, which may lead to delays in registering these periods for calculating social insurance payments, as well as pensions. That is the reason why the PFU has drafted a bill that proposes to change the tax period (from quarter basis to monthly basis) for the submission of consolidated PIT and USC reporting. Thus, different opinions are voiced about the new reporting method. It is believed that changing monthly reports to quarterly reports is going to make life easier for accountants. However, the updated report will make quarterly reporting as well as data reconciliation more challenging, since accrual and payment lag behind in time, and that increases the risk of penalties in case of untimely reconciliation. Anyway, let us “meet” the new method and see how it goes!

Natalia Kholmogorova

Tax Expert at Accountor Ukraine

For a year and a half, legislators have been developing a transition to consolidated payroll taxes reporting. Eventually, new way of reporting was approved by Order of the Ministry of Finance # 773 of Dec 15, 2020. The new method has combined two elements: The Unified Social Contribution report under Form Д4, and the 1ДФ Form. The consolidated reporting method is called “Tax calculation of the amounts of income accrued (paid) in favor of taxpayers – individuals, and the amounts of tax withheld from them, as well as the amounts of the accrued unified contribution” (hereinafter – the “Calculation”).

Accountor Ukraine recommends: Companies shall start reporting under the new method from Q1 2021, and the reports are to be filed till May 11, 2021.

The calculation in UAH with kopecks must be filed to local tax office at the main place of registration. It should be submitted separately for each quarter (tax period), with details for each month of the reporting quarter within 40 calendar days following the last calendar day of the reporting quarter, only in case of accrual of income to the taxpayer during the reporting period. The Calculation Form consists of the title part, which must indicate information about the employer, the employees (other individuals – taxpayers) as well as the contents of the Calculation, and the main (calculation) table which consists of three sections and six appendices.

The Unified Social Contribution data must be reflected in the main part of the Calculation (which is similar to the old Table 1 of the monthly report), in Appendix 1 (which is based on the old Table 6), where data from the main part (the employees, the months when these amounts and the USC amounts were accrued) must be deciphered; and in Appendix 5 (previously Table 5), where HR changes must be indicated. The tax agent must reflect the Personal Income Tax and the Military Fee in Appendix 4ДФ (based on the old 1ДФ report), which only has 3 types (Reporting, New Reporting and Clarification).

Below are the most interesting changes in the Calculation:

1) The main part of the Calculation now offers not three, but four types. Apart from the standard three types (Reporting, New Reporting and Clarification), you can also choose the “Information” type. The Calculations identified as “Information” must be filed by payers of the Unified Social Contribution not for the sake of fixing the obligation, but for the purpose of informing about individual incomes of the insured persons, accrued in certain months outside the reporting period.

Here are some practical explanations of the Pension Fund of Ukraine on how to fill in the “Information” type calculation:

If the employee retires, the Information Calculation must be filed after the employee submits the application letter for the appointment of pension. In this case, the employer shall learn about the need to fill in the Calculation either from the Pension Fund or from the employee;
If the employee applies for sick leave/maternity leave, the information must be filed either before or along with submission of the Calculation Application to the Social Security Fund, since within 10 working days after the receipt of the calculation application, the SSF must check the data of the insured in the State Register of Compulsory State Social Insurance, as well as check the data on USC payments and the correctness of accruals;
The employers will be filing “Information” Calculations for employees who have had insurable events from February 1, 2021;
If you have already submitted certain data for some employees for certain months in the “Information” Calculation, this fact does not relieve you of the obligation to provide data about them in the “Reporting” Calculation. Any other type of Calculation will be deemed as valid except for the “Information” Calculation (that is why there are no strict deadlines for filing this type of Calculation, and there will be no penalties for failing to meet those deadlines!).

2) From now on, the legal successors of liquidated tax agents can file the Clarification form. For this purpose, line 034 was added to the main part of the report, where the assignee can indicate the tax number of the predecessor, on whose behalf the Clarification is submitted.

3) If a legal entity has affiliates (separate subdivisions), there are two options for submitting the report: either the affiliate reports independently, or the parent company reports both for themselves and for the affiliate.

4) The data on the amount of Personal Income Tax and Military Fee withheld and paid to state budget shall be indicated on monthly basis with details for each individual and for each type of income.

5) Wages paid within the established deadlines in the next month must be shown in the 4ДФ form for which the wages were accrued – the previous month.

6) For each individual, the Unified Social Contribution data must be filled in for each reporting quarter for each three months in the relevant lines (each of the lines also has three cells), whereas data on Personal Income Tax and Military Fee must be reflected in the three 4ДФ appendices.

Meanwhile, the Pension Fund of Ukraine emphasizes that the consolidation of Personal Income Tax and Unified Social Contribution reporting and the establishment of a quarterly reporting period contains risks of causing payment delays and delays in providing relevant data to the Register of insured persons, which may lead to delays in registering these periods for calculating social insurance payments, as well as pensions. That is the reason why the PFU has drafted a bill that proposes to change the tax period (from quarter basis to monthly basis) for the submission of consolidated PIT and USC reporting.

Thus, different opinions are voiced about the new reporting method. It is believed that changing monthly reports to quarterly reports is going to make life easier for accountants. However, the updated report will make quarterly reporting as well as data reconciliation more challenging, since accrual and payment lag behind in time, and that increases the risk of penalties in case of untimely reconciliation. Anyway, let us “meet” the new method and see how it goes!