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Is it required to pay ecology tax for wastes in Ukraine twice?

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Maximally fiscal interpretation and application of provisions of the Tax Code of Ukraine by tax authorities reached ecology tax seemingly “little”. At first glance administration of this tax is to be applied to enterprises that emit pollutants into the atmosphere and water, collect trash or produce/store radioactive wastes. Rest of them pay the same way as before, pay the tax (until 01.01.2011 it was fee for pollution of the environment) indirectly by including amount of tax into the cost of garbage removal agreements.

But the State Tax Administration of Ukraine was not satisfied with it. In its letters number 24090/7/15-2117 dated 07.09.2011 and number 23116/7/15-2117 dated 26.08.2011 it provided an opinion according to which all legal entities must pay ecology tax for wastes produced as the result of their activities. Neither garbage removal and storage agreements with a specialized enterprise nor the fact that wastes are stored only temporarily (until transfer to this enterprise) can serve as a ground for ecology tax exemption for legal entities. Thus, Ukrainian tax authorities think that even those enterprises the wastes of which can fit in a waste container that is subsequently removed by a garbage truck must pay ecology tax for wastes that are stored in this container.

Such logic of the State Tax Administration of Ukraine does not only contradict with interpretation of the Tax Code provisions but also with application practice of similar provisions of the Law “On wastes”, conclusions of the Ministry of Ecology and Ministry of Regional Development and results in double taxation. And this is why.

Subsection 240.1 of the Tax Code of Ukraine provides that payers of ecology tax include legal entities that store wastes of their activities in specially designed places or objects. Subsection 14.1.223 of the Tax Code of Ukraine defines term “storage of wastes” as storage and landfill of wastes in specially designed places or objects.

The State Tax Administration of Ukraine does not pay attention to conjunction “and” so it interprets temporary storage same as placement of wastes. And this is the key aspect. If the legislator wanted to impose tax on storage of wastes there would be such conjunction as “or”. The version provided by Subsection 14.1.223 of the Tax Code of Ukraine makes possible placement of wastes only if it includes storage and landfill of such wastes.

This is also supported by law enforcement practice of similar definition of term “placement of wastes” that is provided by Article 1 of the Law “On wastes”. Even though the mentioned rule also defines placement of wastes as their storage and landfill the letter of the Ministry of Ecology and Natural Recourses of Ukraine number 14-6/134 dated 16.02.2000 provides a conclusion according to which a fee for placement of wastes is not collected if the wastes are transferred to another owner on contractual basis (for example a specialized enterprise) instead of their placement on owner’s (manufacturer’s) territory.

Conclusions of the State Tax Administration of Ukraine contradict the latest conclusions of the Ministry of Regional Development and Ministry of Ecology provided in letter number 7/12-8463 dated 04.08.2011 and letter number14364/07/10-11dated 04.08.2011. These conclusions state that containers for household wastes and container sites that belong to consumers (individuals or legal entities) or persons that provide services of household wastes removal do not belong to specially designed places or objects for wastes placement. The main purpose of specially designed places or objects is utilization by means of landfill or disposal. The purpose does not include temporary storage. This is why owners of such containers are not considered to conduct placement of wastes.

Finally such position of the State Tax Administration factually causes enterprises to pay twice for the same amount of wastes. The first time is for the fact of their production and temporary storage. The second time - it is included in cost of an agreement for removal and disposal of the wastes. All these facts contribute to the failure of the position of tax authorities but apparently taxpayers will be able to protect themselves in court only by means of professional legal support.

Probably you will be interested in reading a material about representative experience of our firm called “We prepared legal conclusion on ecology tax on Client’s request and got response from the Ministry of Ecology

This material was prepared by our law firm within practice of Taxation.


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