‘Tax Code: New Rules for Doing Business in Ukraine’

Public Joint Stock Company ‘MARFIN BANK’
International Law Offices
Audit firm ‘TRIADA’
- seminar for chief financial officers, clients and partners -
‘Tax Code:
New Rules for Doing Business in Ukraine’
Room 513, the 5th floor, Conference Hall, MARFIN BANK,
Marine Business Center 2, 11 Polsky Spusk, Odessa
17 February 2011 (Thursday)
Beginning at 04:00 p.m.

The seminar on innovations due to the adoption of new Tax Code of Ukraine was held by International Law Offices together with the audit firm ‘Triada’ and Marfin Bank.

Freight, demurrage and international carriage were highly discussed in the course of the seminar.

VAT on demurrage. If demurrage is a fee for the use over a fixed time, it is reasonable to consider it as a service. There was no VAT on demurrage before 01 January 2011, provided the agreement stipulated it as a penalty. The State Tax Administration of Ukraine accepted it as they deemed it reasonable not to impose fines by virtue of Clause 1.4 of the Law of Ukraine ‘On the Value Added Tax’.

Tax Code introduces a new definition for ‘rendering of the services’ (14.1.185), from now these are any operations that are not delivery of goods. If collection of a fine is considered as the operation, it means that the fine is already a service being subject to VAT.

0%VAT on international carriage. The Tax Code has established new criteria of defining the international carriage for tax purposes. From now the carriage shall be considered international and shall be subject to VAT under 0% rate (Article 195.1.3) if such carriage is carried out under the unified international transport document. Whereas neither the Tax Code nor any other regulative documents include a definition for ‘unified international transport document’.

6% withholding tax upon payment of the freight to the agent being non-resident. Tax Code has introduced a beneficial owner concept.  From now the Ukrainian payer, while paying the freight to a foreign company, will not be able to use the norms on avoidance of double taxation if such non-resident-company is not the beneficial owner/recipient of that income. When the freight is paid to a non-resident (even where there is an agreement on the avoidance of double taxation and the certificate supporting the tax residence) 6% should be paid to the budget if the recipient is an intermediate party, agent or nominal owner.

Nowadays there are two ways out: to increase the cost of freight on 6% or to correct the business-scheme to make the recipient the beneficial owner.

The seminar covered some other actual issues:

• tax authorities advises (pluses and minuses),
• inquiries of tax authorities,
• inspections and appeals against them,
• collective agreements and labour costs,
• court practice on VAT recovery.

 The video record of the seminar is here
http://ru.justin.tv/interlegal/b/279868193

The information on our next seminar will be provided soon.