Corporate Tax 2010 - BMR Advisors

BC Toms & Co
Ukraine
Ukraine
256
community charge (payroll tax), market-place fee and parking fees.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
There is no separate special regime for the taxation of corporate
capital gains and losses, other than for corporate gains and losses
from transactions qualifying as trading in securities or in certain
other corporate rights. Profits and losses from such qualifying
transactions are determined and accounted for separately for each
type of securities or corporate rights. Losses from trading in
securities of a certain type may not be used to offset income from
other activities or trading in securities of a different type. Instead,
the losses exceeding those that may presently be offset for a
particular type of securities may be carried forward indefinitely and
used to offset income from trading in the same type of securities in
future periods. This special tax treatment does not apply to the
issuance of securities or their redemption by the issuer.
Similar rules also exist for the taxation of capital gains of
individuals from transactions with securities and corporate rights.
As opposed to capital gains and losses for companies, however, the
financial results of transactions in all types of securities and
corporate rights by an individual conducted within a tax year are
aggregated. The resulting capital gains, if any, are included in the
annual taxable income of the individual and are taxed at the end of
the year under the generally applicable tax rules, unless a special
rule applies so that such capital gains are taxed by withholding at
the time of the realisation of such gains. Any net losses may be
carried forward indefinitely and used to offset gains from the
individual’s transactions in securities and corporate rights in future
periods.
Starting from 1 January 2007, capital gains by individuals from the
initial sale or other disposition during a tax year of certain types of
real estate, i.e. dwellings (houses, apartments or parts thereof) and
summer houses, are exempt from tax to the extent that their size
does not exceed 100 sq.m. A 1 per cent. rate of individual income
tax is imposed on gains related to the initial sale or other disposition
in a tax year of such real estate exceeding 100 sq.m. Gains on
subsequent sales of such real estate of any size within a tax year are
subject to tax at a rate of 5 per cent.
The gains by individuals from the disposal of movable property are
taxed at the general individual income tax rate of 15 per cent. The
sale of one passenger car, motorcycle, motor, or motorboat (with or
without sail) during a tax year is exempt from tax.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
In general, the same standard corporate profits and individual
income tax rates apply both to capital gains, such as gains from
securities transactions, and to business profits or any other income,
except for the gains of an individual from immovable property and
for certain other minor exceptions.
5.3 Is there a participation exemption
In Ukraine, there is no participation exemption in the classic sense.
Dividends paid to a Ukrainian company are excluded from the
taxable income of the recipient irrespective of the extent of the
shareholding of the corporate shareholder. In addition, dividends
paid to a permanent establishment of a foreign company in Ukraine
are subject to taxation at the standard corporate income tax rate.
Dividends paid to foreign individuals or companies are subject to
withholding tax.
The distributing company is required to pay advance corporate tax
of 25 per cent. on the amount of the distributed dividends, subject
to certain exemptions mentioned below. Such advance tax may
ordinarily be used by companies to offset their corporate profits tax
liabilities. An exception from paying such advance corporate tax is
provided for Ukrainian holding companies deriving more than 90
per cent. of their income from domestic dividends, as mentioned
above.
5.4 Is there any special relief for reinvestment
Where the dividends are paid to individual shareholders in the form
of shares (or of participation interest for limited liability companies)
in the company making the distribution, and such distribution does
not change the shareholding ratio among the shareholders in the
company and results in an increase of the charter capital of the
distributing company, such dividends are not taxed to the recipient
individual shareholders. Where such a pro-rated distribution of
shares (or of participation interests) is made, irrespective of whether
the distribution increases the charter capital of such company, the
distributing company is not required to pay the advance corporate
tax of 25 per cent. on the dividend amount.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
Normally, there is no tax or capital or similar duty on the formation
or increase of the capital of a company under Ukrainian law, except
for the formation of an open joint stock company. For an open joint
stock company the issuance of shares requires the payment of a
State duty in the amount of 0.1 per cent. of the par value of the
shares issued, as observed above.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
Generally, no other significant taxes would be incurred.
6.3 How would the taxable profits of a local branch be
determined
For Ukrainian tax purposes, a Ukrainian branch of a foreign
company constituting a permanent establishment in Ukraine is
treated as a separate entity independent of its head office, and as
observed, it is generally taxed under the same rules as Ukrainian
legal entities. However, several methods may be applied for
calculating the income that will be subject to tax in Ukraine of such
a permanent establishment.
Under the principal method, known as the “direct method”, the
taxable income of such branch is determined by reducing the actual
and deemed income of the branch (that is, the income of the branch
including income that it would have received for goods transferred
and services provided to the non-Ukrainian offices of its company,
had it actually been independent of the head office) by the
deductible expenses incurred directly by the branch. Transfer
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