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The main tax rates in Ukraine under the Tax Code

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Value Added Tax

20 per cent

This rate applies until the 31st of December 2013, later on starting from the 1st of January 2014 it will amount to 17 per cent

Corporate profit tax (including permanent representations of non-residents)

21 per cent

During the year 2011 the rate of 23 per cent was applied. The rate of 21 per cent will apply for the year 2012. Starting from the 1st of January 2013 it will amount to 19 per cent and be reduced to 16 per cent starting from the 1st of January 2014 according to section 20, subsection 4, paragraph 10, of the Transitional Provisions of the Tax Code.

Non-residents profit tax:

 

 

Dividends, royalty

15 per cent

Provided that the tax residence status of the profit recipient is documentarily confirmed, the rate can be reduced as a result of application of corresponding agreement on avoidance of double taxation.

The Tax Code also introduced a criterion ‘a beneficiary owner’ for the possibility of reduced rates, however there is still no practice of implementation thereof.

Interests

0/15 per cent

The following profits of non-residents shall not be subject to taxation, notably interests or profit (discount) on government securities or municipal bonds, or debt securities, of which is secured by the state and local guarantees, sold or placed by non-residents abroad through authorized agents – non-residents; or interest paid to non-residents for loans received from the state, from the Autonomous Republic of Crimea, or from municipalities budgets according to certain conditions, or for credits (loans), received by economic entities, the discharge of which is secured by the state or local guarantees.

15 per cent – other profits in the form of interests, except for the above mentioned.

Freight

6 per cent

The basis of taxation is the base rate of the freight.

A Fiscal Agent is the resident who pays a profit to a non-resident.

Advertising services

20 per cent

Residents who make payments to non-residents for production and/or distribution of advertising shall at the time of such a payment pay tax at the rate of 20 per cent at their own expense. This tax, per se, is a classical tax withholding and the tax burden lies with the Ukrainian company.

Insurance services

0 per cent /

4 per cent /

12 per cent

0 per cent – mandatory insurance, which insurance benefits are paid out to natural persons – non-residents; according to insurance contracts within the system of international contracts ‘Green Card’; insurance and re-insurance against risks.

4 per cent – applicable to contracts of insurance against risks outside Ukraine, according to which awarded claims are made payable to non-residents, except for cases provided by the Tax Code;

12 per cent – other types of insurance awards, payments shall be made at resident’s own expense at the moment of transfer.

Other profits originating

from Ukraine

15 per cent

Provided that an agreement on avoidance of double

taxation does not stipulate a reduced rate.

A possibility to transfer losses of past periods

It is not limited by the Tax Code, however the Tax Authorities believe that losses, displayed in a declaration as results of the year 2010, cannot be indicated in a declaration over a period of the second quarter of the year 2011 (from the date the chapter of the Tax Code, dealing with the corporate profit taxation, comes into effect). For details see below.

Taking into account taxes paid in other countries in order to reduce tax obligations

It is possible if it is documented. The following cannot be taken into account, i.e. capital/property and capital growth taxes; post taxes; sale taxes; other indirect taxes regardless of whether or not they come within the category of profit taxes or if they are subject to certain taxes under legislation of a foreign country.

 

Such positive slogans immediately cast doubts on the viability of the Tax Code, nonetheless only their practical application should help business representatives understand that declarations are not always the guarantees of transparency in cooperation between the state and entrepreneurs (including foreign investors) in the field of taxation.

The main issue is the ‘human factor’ which is concerning a set of tools in the form of rights and powers authorities are entrusted with (according to the Tax Code, these are customs and tax service authorities), and unexpected application of such a set of tools by the tax inspectors. However, the business community does succeed in making a stand for the position of the Tax Code in relation to those important issues being contrary to that fiscal reading, offered by authorities.


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