Archive for June 19th, 2010

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Proposed Changes to Tax Legislation – Ukraine

June 19, 2010

The main changes taking place as a result of the new tax legislation are basically as follows:

The draft law proposes to shave 5 percentage points off the corporate profit tax, to 20% from 25% in 2011 and then every year lowering it by 1 percentage point down to 17% by the year 2014.

The draft law also proposes to gradually cut the rate of VAT to 17% from the current 20% in 2012-2014. The draft law envisage that the basic VAT rate will be cut from 1 January 2012 from the current 20% to 19%, to 18% from 1 January 2013, and to 17% from 1 January 2014.

The basic rate of the tax on personal income, as the draft Tax Code puts it, makes 15% of the tax deduction basis.

At the same time the draft law says that for a number of cases dual personal income tax rate is set.

It is suggested that such rate spreads on the profits accrued as reward or prize (except for the state pecuniary lottery) to residents or non-residents.

Dual rate, if the draft code is approved, non-resident individuals will have to pay taxes for all profits they earn.

The draft Tax Code also says that a 10% rate is applied to levy taxes on personal income received in the form of wages by miners, employees of mine-building enterprises, employed at underground works dull workdays, and also by workers of state-owned paramilitary emergency rescue services, and by a number of other categories of staff working in particularly harmful and heavy conditions.

The draft law proposes to introduce a 5% tax on income individuals earn on placement of assets on deposit or current bank accounts from 2013.

The draft law proposes to abolish 10 local taxes and duties (the communal tax, the fee for issuing permits for placing commerce and service facilities, the fee for the right to use local insignia, the fee charged on dogs’ owners, the fee for issuing notes for apartments, a fee for participation in horse races on hippodromes, the fee for carrying off horse races, the fee from persons who take part in totalisator games on racetracks, the fee for the right of motion picture and television shooting, the fee for arranging local auctions, auction sales and lotteries).

The draft law also envisages introduction of a local tourist fee of 0.5-1% of the cost of night’s lodging.

Moreover, the transport tax will cover planes and helicopters.

The draft law also envisages exempt from taxation 80% of enterprises’ profits earned from sales of energy saving equipment on the customs territory of Ukraine.

The draft Tax Code contains 19 sections (495 pages).

When (rather than if) this is passed, I will attempt to put a link to the whole new tax code here, but for now, here is a link to the draft:

http://gska2.rada.gov.ua/pls/zweb_n/webproc4_1?id=&pf3511=37984

(All in Ukrainian – if you try and hit the link for English it will take you from the text links in blue elsewhere…….yes, I wish my Ukrainian was a good as my Russian right now…….)

In the meantime, something to prepare for when it comes into force on 1st January 2011.

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