Taxes

Due to the efforts of the European Business Association (hereinafter – Association) the Law of Ukraine “On Amendments to the Tax Code of Ukraine concerning Taxpayers Record and Registration and Improvements of Certain Provisions” No657-VII dated 24 October 2013 (hereinafter – the Law No657-VII) amended the Tax Code of Ukraine with the following positive changes, particularly:

• corrected a technical mistake, which influenced the criteria for determining the states with a low tax jurisdiction;
• provided the right of the taxpayers to indicate temporary or permanent tax differences;
• cancelled the introduction of a new obligatory requisite for tax invoices.

Background: in the letter No861/2013/21 dated 2 September 2013, concerning the application of new provisions regarding transfer pricing, the Association focused its attention on a technical mistake, which was made after the editing of the Draft Law “On Amendments to the Tax Code of Ukraine concerning Transfer Pricing” No2515 dated 12 March 2013 and its adoption by Verkhovna Rada of Ukraine (hereinafter – the VRU) as a Law of Ukraine “On Amendments to the Tax Code of Ukraine concerning Transfer Pricing” No408-VII dated 4 July 2013(hereinafter – the Law No408-VII). In particular, when amending subparagraph 39.2.1.2 of paragraph 39.2 of article 39 of the Tax Code of Ukraine (hereinafter – the TCU) concerning determination of the list of the controlled operations, in the published Law No408-VII the phrase “percentage points” was replaced by the word “interest”. Such incorrect editing had a significant impact on the content of article 39 of the TCU, as it has changed the criteria for determining the states with low tax jurisdiction, which increased the diapason of states with low tax jurisdiction and consequently the amount of the operations considered as controlled under the TCU.

We are pleased to announce that this previously committed mistake was corrected in article 5 of the Law No657-VII, which was signed by the President of Ukraine on 8 November 2013.

Besides the Association in its letter No231/2013/21 dated 25 February 2013 supported the appropriate changes to the TCU, suggested by the  Draft Law “On Amendments to the Tax Code of Ukraine (concerning Improvement of the Provisions of the Tax Code of Ukraine)” No2034 dated 17 January 2013 (hereinafter – the Draft Law No2034). Particularly, paragraph 10 of Draft Law No2034 suggested publishing of subparagraph 3 of paragraph 46.2 of article 46 of TCU in new edition, which was contemplated to entrench the legal right, but not obligation, of taxpayers to indicate temporary or permanent tax differences in the financial report under the form, adopted by the central body of the executive power, which realizes the state’s financial policy.

We are pleased to inform that such edition of paragraph 10 of the Draft Law No2034 was reflected in article 7 of the Law No657-VII. In the Association’s opinion, such amendments will lead to the harmonization of the provisions in article 46 of the TCU with the relevant provisions of subparagraph 17.1.12 of paragraph 17.1 of article 17 of the TCU, which classifies the accounting of the tax differences as a right of taxpayers, but not their obligation.

Among other successes of the Association we are glad to mention the cancellation of subparagraph “ї” of paragraph 201.1 of article 201 of the TCU.  On 12 August 2012 the Law of Ukraine “On Amendments to the Tax Code of Ukraine on the State Tax Service and in Connection with the Administrative Reform of Ukraine” No5083-VI dated 5 July 2012 (hereinafter – the Law of Ukraine No5083-VI) came into forceand supplemented article 201 of the Tax Code of Ukraine (hereinafter – the TCU) with new subpart “ї”, which provided the new obligatory requisite of the tax declaration, particularly “number and  date of the customs declaration, under which the customs clearance of the goods, imported to the customs territory of Ukraine, was performed”.

It should be stressed that the Law of Ukraine No5083-VI did not provide a transitional period or special provisions regarding the beginning of the mandatory requisites’ specification, especially given the accounting program for entering into compliance with the new requirements takes time. Following abovementioned and due to the efforts of the Association, subparagraph “ї” of paragraph 201.1 of article 201 of the TCU was temporarily suspended until 1 July 2013 by the Law of Ukraine “On Amendments to the Tax Code of Ukraine on the Revision of Certain Taxes and Fees” No5503-VI dated 20 November 2012.

With the approaching of the date of renewal of the foregoing subparagraph the Association has repeatedly appealed to the Ministry of Revenue and Duties of Ukraine and to the Committee of the Verkhovna Rada of Ukraine on Taxation and Customs Policy to provide an official explanation on the mandatory use of such an additional requisite as soon as possible. The next step was to apply to state bodies regarding the proposed cancellation of subparagraph “ї” of paragraph 201.1 of article 201 of the TCU.

The Association is pleased to inform that subparagraph “ї” of paragraph 201.1 of article 201 of the TCU was cancelled by paragraph 1 of article 43 of the Law No657-VII.

The Association would like to express its gratitude to all state bodies, which were involved in those processes and to all member-companies for their active participation and persistence in resolving this issue. The Association will continue to work on resolving problematic issues for our members and to protect their legal interests.