Corporate Tax 2010 - BMR Advisors

BC Toms & Co
Ukraine
pricing rules may also apply to transactions between foreign
companies and their branches in Ukraine.
Such rules are applied, to begin with, by presuming that the stated
contract price is an arm’s length price, but this presumption may be
challenged by the tax authorities. The principal method used for
determining arm’s length prices is, with certain exceptions, the
Comparable Uncontrolled Price method pursuant to which the tax
authorities may adjust the price of transactions between related
parties to the “usual price” for profits tax purposes. The usual price
is essentially the market price for equivalent transactions where the
goods or services are sold to independent persons under usual
economic conditions. If where these rules apply, the contract price
is higher than the usual price at the time of the purchase, however,
the usual price should be applied for tax purposes.
For natural monopolists, the arm’s length price may be established
by the Resale Price method or, in certain cases, by the Cost Plus
method, under regulations to be promulgated by the Cabinet of
Ministers of Ukraine.
4 Tax on Business Operations: General
4.1 What is the headline rate of tax on corporate profits
The standard corporate profits tax rate is 25 per cent. This rate
applies to the taxable income of Ukrainian companies and the
permanent establishments in Ukraine of foreign companies. As an
exception, the income of resident insurance companies, defined as
the amount of insurance and reinsurance premiums received by
such companies reduced by the amounts of any insurance premiums
payable by such companies to residents for reinsurance, is taxed at
either a 0 or a 3 per cent. tax rate, depending on the type of
insurance involved.
Certain legal entities may opt to use the simplified taxation system
according to which VAT registered entities pay tax at a rate of 6 per
cent. of their sales proceeds, and non-VAT registered entities pay at
a rate of 10 per cent. There is also a minimal tax under a simplified
taxation method provided for private entrepreneurs with relatively
small turnover.
In addition, some types of income (such as dividends, interest,
royalties, lease payments, income from the disposition of real estate
located in Ukraine, income from transactions with securities or
other corporate rights, broker fees, agent fees and several other
types of Ukrainian source income) paid by Ukrainian residents or
Ukrainian permanent establishments of non-residents to nonresident
companies are subject to a 15 per cent. final withholding
tax. Reduced tax rates (or a tax relief) may apply based on tax
treaties entered by Ukraine and special rules apply if the recipient is
a company having a permanent establishment in Ukraine.
4.3 What is the tax base for that tax (profits pursuant to
commercial accounts subject to adjustments; other tax
base)
The calculation of the tax base for corporate profits tax is not based
on financial accounting standards. Instead, the taxable income for
corporate profits tax purposes is solely determined, following
Ukrainian tax accounting rules, by deducting from the adjusted
gross income any allowable gross expenses and depreciation
deductions. The adjusted gross income includes all revenues from
all types of activities received or accrued by a taxpayer during the
relevant tax accounting period, both from Ukrainian and foreign
sources. The tax base for insurance companies is determined
following special rules, as indicated above.
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
Generally, taxable income differs significantly from the profits
shown in commercial accounts. This is mostly due to the
exemptions for certain types of income from being considered as
taxable income, the existence of severe restrictions on the
deductibility of certain expenses for tax purposes and the
application of different depreciation methods under tax accounting
rules as compared to financial accounting standards.
4.5 Are there any tax grouping rules Do these allow for relief
in Ukraine for losses of overseas subsidiaries
There is no system for group taxation in Ukraine, and therefore the
members of a corporate group must file separate tax returns. There
are no provisions under Ukrainian law that would allow the losses
of one group member to be applied to reduce the profits of another
group member.
Under the general rules, if a Ukrainian company has a branch
(which is not a separate legal entity) located in a regional or
municipal jurisdiction different from that where the company itself
is principally registered, such branch should also be separately
registered as a payer of corporate profits tax. The company,
however, may decide to file a consolidated tax return, in which case
the amount of corporate profits tax payable respectively at the
principal location of the company and at the location of each branch
are allocated following a set procedure.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
The same corporate profit tax rate (25 per cent.) applies both to
distributed and retained profits.
Ukraine
4.2 When is that tax generally payable
Under the generally applicable rules, the corporate profits tax must
be assessed and reported for each of the first three quarterly fiscal
periods, including for the fiscal year through each such quarter and
for the full fiscal year reporting period, within 40 days after the end
of each such period. The tax should be paid quarterly, within 10
calendar days after each tax declaration for a reporting period must
be filed, so that the tax must be paid within 50 calendar days after
the end of each of the first three quarterly reporting periods and
after the end of the fiscal year. A fiscal tax year is a calendar year.
Withholding taxes should be paid not later than the date that the
income is paid.
ICLG TO: CORPORATE TAX 2010
© Published and reproduced with kind permission by Global Legal Group Ltd, London
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
The most significant national taxes and duties not discussed above
include individual income tax, land tax, rental payments and other
fees on oil and gas, tax on the owners of motor vehicles and the
mandatory payments to the State pension fund.
4.8 Are there any local taxes not dealt with in answers to
other questions
The principal local taxes and fees include the advertising tax,
255
WWW.ICLG.CO.UK