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The Law of Ukraine of 24.10.2013 No. 657-VII was published in the newspaper “Holos Ukrayiny”. It introduces amendments to the Tax Code of Ukraine to improve certain provisions and the accounting and registration of taxpayers.
The Law of Ukraine of 24.10.2013 No. 657-VII was published in the newspaper “Holos Ukrayiny”. It introduces amendments to the Tax Code of Ukraine to improve certain provisions and the accounting and registration of taxpayers.
Significant changes to the issue of profit tax will take effect from 01.01.2014. In particular, indicating tax differences in the financial statements will become a right rather than an obligation.
Clause 46.2 of the Tax Code will provide that when preparing financial statements the profit tax payer “has the right to indicate” (and not “indicates”) temporary and permanent tax differences in the form established by the central executive authority that implements state financial policy.
At the same time, paragraph 1 of subsection 4 of section XX of the Tax Code remains in force, which specifically states: “Business entities – profit tax payers submit financial statements taking into account tax differences starting from reporting periods of 2014” .
Regarding the base reporting period
After the amendments come into force on 01.01.2014, the annual base reporting period will apply to everyone, except for two exceptions (clause 152.9 of the Tax Code):
- enterprises that had income (which affects the taxable object) exceeding 10 million in the previous reporting year and at the same time do not pay advance payments, but in the first quarter of the reporting year received a profit, are obliged to submit a tax return for the first half-year, three quarters and the year in order to calculate and pay tax liabilities (clause 57.1 of the Tax Code);
- profit tax payers who pay advance payments, but based on the results of the first quarter of the reporting (tax) year did not receive profit or incurred a loss, have the right to submit a tax return and financial statements for the first quarter. Then they do not make advance payments in the second-fourth quarters of the reporting (tax) year, and tax liabilities are determined on the basis of the tax return for the results of the first half-year, three quarters and the year, which is submitted to the controlling authority.
Regarding the useful life terms of intangible assets
The terms of use of intangible assets have been limited. If under the title document the term of the right to use an intangible asset is not specified, such useful life is determined by the taxpayer independently, but cannot be less than two and more than 10 years of continuous use (subparagraph 145.1.1 of the Tax Code). Currently the term for such assets is 10 years. These changes will take effect on 01.01.2014.
A legal entity’s debt may be considered uncollectible if there is insufficient property for repayment
From 01.01.2014 an overdue debt of an individual or legal entity (previously only individuals were mentioned) that has not been repaid due to insufficient assets of the said person, provided that the creditor’s actions aimed at compulsory recovery of the debtor’s assets did not lead to full repayment of the debt, will be considered an uncollectible debt.
The issue of “5 percentage points” in transfer pricing has been resolved
As of 13.11.2013, for the purposes of transfer pricing, namely for the control of a transaction, one of the conditions has been clearly specified: the profit tax rate in the non-resident’s country or the rate at which the non-resident pays tax must be on “5 percentage points” or more lower than the rate in Ukraine. Previously it was expressed simply as “by 5 percent”, which caused ambiguity and concerns that tax authorities would treat a 5% deviation as relative rather than absolute.
Only taxpayers of profit tax are considered “residents” (for Section III of the Tax Code)
Due to the update of clause 14.1.213 of the Tax Code, if “residents” are mentioned in Section III “Profit Tax” of the Tax Code, this refers only to profit tax payers. In other words, the provisions of Section III that refer to residents do not apply to single tax payers.
The updated provisions regarding controlled transactions (clause 39.2.1 of the Tax Code) came into force on 24.10.2013.