United States: Kyiv Tax Newsletter - April 13, 2017

Last Updated: April 24 2017
Article by Igor Davydenko and Tetiana Gryn

Personal income tax on inheritance

On 23 March 2017, the President of Ukraine signed the Law of Ukraine "On Amendments to the Tax Code of Ukraine Concerning the Taxation of Inheritance" (hereinafter – the Law on inheritance tax), which simplifies the settlement of heritage for the immediate family of the testator. The draft law was adopted by the Parliament on 23 February 2017.

The Law exempts from personal income tax (hereinafter PIT) the cost of the inheritance obtained by family members of extended relatives – brothers and sisters, grandparents on maternal and paternal sides, grandchildren. Before the amendments were introduced, the Tax Code provided exemption from PIT income of testator's family members only for immediate relatives – parents, spouse, children, including adopted children.

Heritage of heirs of immediate and extended family members as well as objects granted to the taxpayer as a gift, which are taxed at a zero PIT rate, are exempt from the necessity to evaluate the inherited objects of heritage for tax purposes.

The law comes into force on the day following the day of its publication and is applied to income from inheritance / gifts starting from 1 January 2017.

VAT applicable to agricultural enterprises

On 23 March 2017 the Parliament adopted the Law "On Amendments to the Tax Code of Ukraine on the Protection of Domestic Agricultural Producers" (hereinafter – the Law on amendments to the Tax Code).

Since the special VAT regime for agricultural enterprises and agricultural producers has been canceled as of 1 January 2017, the agricultural enterprises and agricultural producers faced a number of problems with the transition to a common system of taxation. A significant number of agricultural enterprises have failed to properly use the legitimate right for preferential VAT regime for the period 2016. The main reason for these problems was that the State Treasury Service of Ukraine blocked the appropriate accounts. The Law introduces amendments to the Tax Code of Ukraine that enable to include the funds to which agricultural producers are legally entitled in the formula for the registration of tax invoices in the Unified Register of Tax Invoices.

The law comes into force on the day following the day of its publication.

The amendments to the Tax Code regarding taxpayers located in temporarily occupied territory

On 23 March 2017 the Parliament adopted the Law "On Amendments to the Tax Code of Ukraine Concerning the Clarification of Certain Provisions and Elimination of Contradictions Arising with the Adoption of the Law of Ukraine 'On Amendments to the Tax Code of Ukraine on Improving the Investment Climate in Ukraine'."

The provisions of the law apply to taxpayers who, as of 14 April 2014, had a temporary location on the occupied territories. The Law cancels the exemption from liability established by the Tax Code of Ukraine. The law prohibits the repayment of accrued and paid amounts of real estate tax and the amounts of the land tax and some other changes during the period of conducting of antiterrorist operation.

The Law establishes that the taxpayers located on the territory of the settlements situated on the line of contact are not subject to the requirements as to the prohibition to order excise marks for the purposes of labelling alcoholic beverages and tobacco products manufactured on that territory. The Law prohibits returning the immovable property tax amounts accrued and paid during the period of the antiterrorist operation, as well as the land fee amounts and some other amendments.

The law comes into force on the day following the day of its publication and applies to tax periods starting from 1 January 2017.

The Supreme Administrative Court of Ukraine has summarized the practice of the application of the Customs Code of Ukraine

On 13 March 2017 the Supreme Administrative Court of Ukraine (SACU) adopted a resolution which has summarized the practice of application of the Customs Code adopted as of March 13, 2012 by the administrative courts of Ukraine.

The court, inter alia, has made the following conclusions:

  • Contradictions in the information on the conditions of payment for goods discovered in the documents attached to the customs declaration for the confirmation of the customs clearance of goods should not serve as sufficient grounds for requesting any additional documents from the declarant.
  • Cost calculation of the manufacturer should serve as sufficient and appropriate evidence for the confirmation of the declared customs value of goods.
  • The absence of the reference to the requisites of the foreign trade agreement in the invoice should not serve in isolation as the basis for the conclusions of the inability to identify the validity of the invoice for the supply of goods, provided that such identification can be made on the basis of other documents attached for the confirmation of clearing the goods through customs.
  • The courts have a right to adopt a way of protecting the rights of the declarant as obligation of the customs authorities to perform the customs clearance of goods based on the customs value declared by the declarant.
  • A claim for the return of overpaid customs duties arises only after the cancellation of the decision on the adjustment of customs value, according to which this overpayment has occurred, and so on.

All other conclusions can be found in the annex to the resolution № 2, dated13.03.2017.

The clarification letters

On 24 January 2017 the State Fiscal Service of Ukraine (hereinafter - the SFSU) has clarified the issue to perform costs adjustments for the state health insurance. According to SFSU, a taxpayer is required to increase the financial result before the taxation at the amount of prepaid payments, fees, premiums with application of the financial penalty at the rate of 120 percent of the interest rate of the National Bank of Ukraine, valid at the end of the period during which the dissolution of the contract occurred, provided that such agreement has failed to meet the requirements established by this Code. This position is rather vague and fiscal and does not correspond to the basic provisions of the Tax Code of Ukraine; therefore, there are reasons to challenge this position.

On 13 February 2017 the SFSU clarified the issue of the payment of advance corporate income tax during the payment of dividends, in particular, in case when the amount of the dividends does not exceed the value of the taxable object of the company for the relevant tax (reporting) year, for which the dividends are paid, provided that the monetary obligation for such period has been paid off, in this case the advance corporate income tax should neither be charged for nor paid by the company during dividends distribution.

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