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The Language of Source Documents in Ukraine

27/ 08/ 2021
  Tetiana Sheremet. Tax Expert of Accountor Ukraine After the Law # 996 On accounting and financial reporting in Ukraine entered into force, source documents are defined as documents containing information about a business transaction. Consequently, it is no longer a document confirming the fact of the economic transaction, but only containing the information about it. Meanwhile, according to the Tax Code of Ukraine, taxpayers are required to keep records of income, expenses and other indicators based on source documents so that the relevant taxes and fees could be calculated promptly and paid timely. Besides, it is prohibited to file tax reports with indicators taken from data unconfirmed by valid source documents. In Ukraine, the fact of a business transaction can be tracked in such source documents as Acts of Acceptance of Works (Services) Rendered, Invoices, and Consignment Notes. These may be digital or paper documents. To switch to electronic document exchange, companies must issue an Order thereon, and an Instruction (Regulation) on Digital Documents setting out basic requirements for the layout and storage of digital documents. Companies must also conclude additional agreements with counterparties on electronic document exchange. However, Accountor Ukraine advises to take all factors into consideration, as according to Order # 1886/5, companies must draft documents intended for permanent and long-term (10 years and over) storage both in digital format and on paper. To be valid, a a source document must contain the required details: name, date and place of issue, name of counterparties, content, volume and unit of measurement of the transaction; information about the persons responsible for the transaction and the related documentation, and their personal signature. According to Regulation # 88 of May 24, 1995 On documentary support of accounting records, all source documents, accounting registers, accounting reports and other statements in Ukraine must be drawn up in Ukrainian. Documents that are the basis for accounting entries, if drawn up in a foreign language, must have a translation into the official language certified by both the translator and the company. In addition, Article 13 of the Law of Ukraine # 2704 of 25.04.2019 On ensuring the functioning of the Ukrainian language as the state language sets out a clear rule: The language of local acts regulating the activities of enterprises, institutions and organizations of state and communal forms of ownership is the state language. Tax authorities express their opinion via the “ZIR” tax consulting platform ЗІР, and they unambiguously adhere to the statement that In accordance with Art. 10 of the Constitution of Ukraine, the state language in Ukraine is the Ukrainian language. The state ensures the all-round development and functioning of the Ukrainian language in all spheres of public life throughout Ukraine. Of course, they admit that documents may be translated into Ukrainian; however, the translations must be prepared in advance, as the company may have no time to translate their documents during a tax audit, as in that case, tax authorities shall set out deadlines for the submission of documents. If the company fails to provide the translations on time, the tax authorities may use the services of their translator. Since their translator may translate some complex technical names or some specific words differently from the way the company may have already translated them in other documents, the company may be obliged to pay Corporate Income Tax and Value-Added Tax (as the description of the services (works) in the source documents might not match the description in the contract, and the connection between them will be deemed unconfirmed). Companies registered in Ukraine carrying out import and export activities (i.e., FEA: Foreign Economic Activities), must ensure their documentation complies with the following requirements: The Ukrainian language as state language must be used in international treaties and related documents throughout Ukraine. The documents on foreign economic activities issued by residents of Ukraine must be drawn up in two languages: the state language of Ukraine and the language of the other party to the contract. If state bodies, other enterprises, institutions, organizations etc. request copies of the FEA Agreement or other related documents, the company must provide translations of contracts and other related documents into Ukrainian (which incurs additional costs if the documents were initially drawn up in the foreign language only). FEA agreements (contracts) or documents related to such agreements (contracts) may be declared invalid by court if they fail to comply with the requirements of Ukrainian laws or international treaties. If a transaction is declared null and void, each party must return to the other party the funds received as a result of this transaction. Funds received as financial aid may be recognized as profit, which may result in obligation to pay the Corporate Income Tax plus penalties for the late payment thereof. Therefore, when doing business in Ukraine, it is advisable for international companies to check their compliance with local document management requirements. This way, many misunderstandings and risks can be avoided. And, of course, Accountor Ukraine is always happy to help you with that.

Tetiana Sheremet

Tax Expert of Accountor Ukraine

After the Law # 996 “On accounting and financial reporting in Ukraine” entered into force, source documents are defined as documents containing information about a business transaction. Consequently, it is no longer a document confirming the fact of the economic transaction, but only containing the information about it. Meanwhile, according to the Tax Code of Ukraine, taxpayers are required to keep records of income, expenses and other indicators based on source documents so that the relevant taxes and fees could be calculated promptly and paid timely. Besides, it is prohibited to file tax reports with indicators taken from data unconfirmed by valid source documents.

In Ukraine, the fact of a business transaction can be tracked in such source documents as Acts of Acceptance of Works (Services) Rendered, Invoices, and Consignment Notes. These may be digital or paper documents. To switch to electronic document exchange, companies must issue an Order thereon, and an Instruction (Regulation) on Digital Documents setting out basic requirements for the layout and storage of digital documents. Companies must also conclude additional agreements with counterparties on electronic document exchange. However, Accountor Ukraine advises to take all factors into consideration, as according to Order # 1886/5, companies must draft documents intended for permanent and long-term (10 years and over) storage both in digital format and on paper.

To be valid, a a source document must contain the required details: name, date and place of issue, name of counterparties, content, volume and unit of measurement of the transaction; information about the persons responsible for the transaction and the related documentation, and their personal signature.

According to Regulation # 88 of May 24, 1995 “On documentary support of accounting records”, all source documents, accounting registers, accounting reports and other statements in Ukraine must be drawn up in Ukrainian. Documents that are the basis for accounting entries, if drawn up in a foreign language, must have a translation into the official language certified by both the translator and the company.

In addition, Article 13 of the Law of Ukraine # 2704 of 25.04.2019 “On ensuring the functioning of the Ukrainian language as the state language” sets out a clear rule: “The language of local acts regulating the activities of enterprises, institutions and organizations of state and communal forms of ownership is the state language.”

Tax authorities express their opinion via the “ZIR” tax consulting platform “ЗІР”, and they unambiguously adhere to the statement that “In accordance with Art. 10 of the Constitution of Ukraine, the state language in Ukraine is the Ukrainian language. The state ensures the all-round development and functioning of the Ukrainian language in all spheres of public life throughout Ukraine.” Of course, they admit that documents may be translated into Ukrainian; however, the translations must be prepared in advance, as the company may have no time to translate their documents during a tax audit, as in that case, tax authorities shall set out deadlines for the submission of documents. If the company fails to provide the translations on time, the tax authorities may use the services of their translator. Since their translator may translate some complex technical names or some specific words differently from the way the company may have already translated them in other documents, the company may be obliged to pay Corporate Income Tax and Value-Added Tax (as the description of the services (works) in the source documents might not match the description in the contract, and the connection between them will be deemed unconfirmed).

Companies registered in Ukraine carrying out import and export activities (i.e., FEA: Foreign Economic Activities), must ensure their documentation complies with the following requirements:

  1. The Ukrainian language as state language must be used in international treaties and related documents throughout Ukraine.
  2. The documents on foreign economic activities issued by residents of Ukraine must be drawn up in two languages: the state language of Ukraine and the language of the other party to the contract.
  3. If state bodies, other enterprises, institutions, organizations etc. request copies of the FEA Agreement or other related documents, the company must provide translations of contracts and other related documents into Ukrainian (which incurs additional costs if the documents were initially drawn up in the foreign language only).
  4. FEA agreements (contracts) or documents related to such agreements (contracts) may be declared invalid by court if they fail to comply with the requirements of Ukrainian laws or international treaties.
  5. If a transaction is declared null and void, each party must return to the other party the funds received as a result of this transaction. Funds received as financial aid may be recognized as profit, which may result in obligation to pay the Corporate Income Tax plus penalties for the late payment thereof.

Therefore, when doing business in Ukraine, it is advisable for international companies to check their compliance with local document management requirements. This way, many misunderstandings and risks can be avoided. And, of course, Accountor Ukraine is always happy to help you with that.

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