Comments on legislation for Yurlikbez column of “Segodnya” newspaper

Our firm’s lawyer Andriy Buzynnyi provided comments on legislation for Yurlikbez column of “Segodnya” newspaper.

Comments were published in the newspaper ”Segodnya” on the 23^rd of November 2012 and also on the 4^th of December 2012.

Text of the materials is provided below

Question:

My son is a sole proprietor who conducts activities as a cash messenger. He is visually impaired. Because of his ignorance while completing his very first tax return for the State Tax Service in Kyiv he listed the collected amount of money and deposited amount of money for the  first quarter of the year which sum into 381212 UAH 88 kopecks. Tax Service imposed a fine on him in the amount equal five times the amount of the tax total - 1906564 UAH 40 kopecks.

Then the Tax Service sued him and the court ruled to recover this amount of money. Is there any way my son could avoid paying fines taking into consideration that he is a novice entrepreneur?

Advices are provided by Andriy Buzynnyi, senior associate lawyer of law firm "Pravova Dopomoga”:

An individual entrepreneur is liable for his obligations with all his assets. Thus the recovery of the debt is possible by cash and by other personal property including real estate (apartments).

The fines are directly dependent on the type of tax violation so their amount differs. However the amount of fines does not depend on whether you are a novice entrepreneur. Of course it is possible to avoid fine payment but to do so it is necessary to appeal the decision of the controlling authority (if it hasn’t been already done) and the ruling of the court. Specific ways and possibilities of appeal can be determined only on the basis of documents’ and taken actions’ analysis. In case if your son has no money or property upon which a fine may be imposed the debt can be repaid from any future revenues. For example in this it can be deducted no more than 20% case of pension and no more than 50% of wage."

Question:

Our only son long lives and works in Chelyabinsk (Russia). My wife and I want to register our apartment in Kiev under his name. A notary proposed several options: grant, will, lifetime retention agreement or sale. Who and how much will have to pay in this case for documents’ registration?

Advices are provided by Andriy Buzynnyi, senior associate lawyer of law firm "Pravova Dopomoga”:

In your situation you can choose 2 main scenarios. It depends on who will be the taxpayer: the owner of the property (the alienator) or whoever the property transferred to (the recipient). If you choose the sale, barter or other form of transfer of rights to the apartment except inheritance or granting the obligation to pay the tax will be imposed on you (the alienator).

However according to Article 172 of the Tax Code if you sell property not more than once a year you fall under tax exemptions. However if your son is recognized as a "non-resident" he will be obligated to pay 15% of the selling price during the further sale (alienation). If you choose granting or inheritance the obligation to pay the tax will be imposed on your son (the receiver). In accordance with Article 174.2.1 of the Tax Code the recipient who is a first-degree relative of the alienator falls under tax exemption (as in your situation). However if the recipient is a “non-resident” the tax rate will be 15-17% regardless of the kinship degree.

As you can see obtainment of resident’s status by your son will allow him to save on tax payments. Such status can be obtained absolutely legitimately using the definition of "center of vital interests" in Ukraine. This can be achieved with the support of a lawyer.