Archive for February 8th, 2011


Tax Code Amendment Proposals

February 8, 2011

The Fortetsia All-Ukrainian Association of Small and Medium Businessmen has proposed to set the single tax rate for businessmen using the single tax system on the basis of their annual turnover, types of activities and the size of the minimum wage.

The proposal is stipulated in a draft law on amendments to the Tax Code regarding the single tax system drawn up by the association and posted on its Web site.

According to a posting on the Web site of the council of entrepreneurs under the Ukrainian cabinet, at a meeting held on February 4 of a working group at the Finance Ministry to draw up a law on reforming the single tax system, agreements that the above-mentioned draft law would be taken as a basis for future discussion and elaboration were reached.

According to the document, businessmen are to be divided into three categories: medium, small and micro businesses, with a zero tax rate set for the latter.

Individual businessmen who provide services such as repair, craftsmanship or retail trade on the market without hired employees and who have turnover worth up to 150 minimum wages per year can be considered a micro business.

The single tax for production, trade or service provision to individuals (apart from land and property leasing) or catering (apart from restaurants) with a turnover up to 1,200 minimum wages per year and up to ten hired employees, is proposed at the level from 40% to 60% of the size of minimum wage set as of January 1 of the reporting year.

In addition, for businesses in the trade sphere with an annual turnover of up to 2,300 minimum wages and with ten hired employees, the single tax rate is proposed to be 3% of the income from sales of goods, labor and services if VAT is paid in line with the Tax Code, and 5% of the incomes from sales of goods, labor and services if VAT is included in the single tax.

The rates for companies can be set at 3% (with VAT) and 5% (without VAT) of annual income, but restricting the size of income per year to no more than 7,000 minimum wages and with no more than 50 hired employees.

Commenting on the document to Interfax-Ukraine, Fortetsia’s head, Oksana Prodan, said that if the draft law were approved, many taxation optimization schemes would be eliminated. The draft would allow the retention of the single tax system, in particular, for auditors and law services, for which it was earlier proposed to ban the application of the single tax system, she added.

“We’re sure that if the draft law were adopted, those who today operate in the shadows would return to legal business,” she said.

Prodan said that auditors would be able to use the single tax system.

“Today we proposed to take our draft law as a basis in the Finance Ministry,” she said.

She added that the Finance Ministry has ideas to regulate the single tax system, but they don’t have their own draft law.

As reported, until amendments regarding the single tax system are made to the Tax Code, the presidential decree on the single tax system for small businessmen (No. 727/98 of July 3, 1998) remains in effect.

However, with the adoption of the Tax Code, the key change in the activities of single taxpayers was a ban on considering the purchase of goods from single taxpayers as gross expenses and to actually tax them under the tax on profit.

Obviously time to become a micro consultancy business……an official zero tax sounds very inviting!

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