At the beginning the participants discussed a Comparative Table to the Draft Law “On Amendments to the Tax Code of Ukraine regarding Budget Debts Settlement by Promissory Notes Emission” that had been highlighted by Mr. Volodymyr Tkachenko, ArcelorMittal at the previous Committee meeting and Proposals developed by Ms. Khrystyna Stelmakh, Cargill.

It was agreed to incorporate mentioned proposals and submit the document to the relevant key policy makers for consideration.

Then Committee Members highlighted their matters of concern, including:

• Sale of goods and services in the framework of agency contracts and difficulties with taxation, covered by Mr. Oleksandr Chumak, Groupon UA Ltd.
• Draft Law #5889 dated December 14^th, 2011 “On Amendments to the Tax Code of Ukraine (regarding Establishment of a Zero Tax Rate on Incomes Received by Individuals in the Form of Compensated (Deduct) Banks Ukraine Bad Loans for All Types of Loans)” developed by Mr. Arseniy Yatseniuk, Peoples Deputy of Ukraine.

Mr. Vadym Kononenko, OJSC Raiffeisen Bank Aval highlighted negative impact of the Document on the banking system of Ukraine in case of its adoption and mentioned that the Document ignores current civil legislation and NBU regulations requirements, as well as may cause losses for the banking system due to misinterpretation of provisions of Tax Code of Ukraine by the State Tax Service authorities. It was agreed to develop a position paper on the Draft Law and send it to the relevant Committee of the Verkhovna Rada of Ukraine.

• Difficulties with reporting of non-residents consulting services presented by Mr. Vadym Kononenko, Raiffeisen Bank Aval.
• Mechanism of reporting and VAT imposing on consulting services raised by Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC. It was agreed to address the Verkhovna Rada of Ukraine for clarification on this issue.
• Referring to the gross cost of warranty repairs.
• Court practices on tax losses carry forward.

The remainder of the meeting was devoted to the legislative initiative developed under the chairmanship of Mr. Sergiy Tigipko, Vice-Prime-Minister of Ukraine – Minister of Social Policy of Ukraine related to transfer prices. Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC highlighted main provisions of the Draft Law “On Amendments to the Tax Code of Ukraine” published on the official web-site of the Ministry of Social Policy of Ukraine for public consideration and innovations to be introduced by the Document, including the list of goods controlled by the Government, price cap, regulating authority, annual reporting, procedure of squaring of prices with the State Tax Service of Ukraine, etc. It was agreed to develop a Chamber Position to the Document after its registration by the Verkhovna Rada of Ukraine.

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svitlana Burlaka, Chamber Policy Officer (External Relations). 

1. Update on legislative initiatives related to the transfer prices by Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC.
2. Update on tax initiatives developed under the chairmanship of Mr. Sergiy Tigipko, Vice-Prime-Minister of Ukraine – Minister of Social Policy of Ukraine, by Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC.
3. Tax losses carry forward update, by Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd.
4. Other issues.

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svitlana Burlaka, Chamber Policy Officer (Committees).

On Thursday, December 22^nd, 2011 the Chamber Tax Committee meeting took place. The agenda of the meeting was devoted to discussion of the following items:

• Position regarding the Draft Law “On Amendments to the Tax Code of Ukraine regarding Budget Debts Settlement by Promissory Notes Emission”.

Mr. Volodymyr Tkachenko, ArcelorMittal and Mr. Hennadiy Voytsitskyi, Baker & McKenzie - CIS, Limited covered proposals developed by them to the Draft Law “On Amendments to the Tax Code of Ukraine regarding Budget Debts Settlement by Promissory Notes Emission”. According to Mr. Tkachenko the proposals will form a basis for the Draft law aimed at solving the VAT refund problem.

Please click here to view the Comparative table to the Draft Law “On Amendments to the Tax Code of Ukraine regarding Budget Debts Settlement by Promissory Notes Emission” that comprises mentioned proposals.

The Chamber would like to encourage interested members to provide your feedback to the Document. Please provide us with comments and suggestions by Wednesday, January 11^th, 2012, 2:00PM as well as inform the Chamber whether you support the submission of the Draft Law that will be based on proposals developed by   Baker & McKenzie - CIS and ArcelorMittal.

• Update on the Letter of the State Tax Service of Ukraine dated November 19^th, 2011 # 6727/7/15-3417-26 “On VAT on Amount of Penalty for Default on a Contract”.

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd updated participants on provisions of the Letter of the State Tax Service regarding penalty for default on contracts.

It was agreed to address Mr. Vitaliy Khomutynnik, Head of the Parliamentary Committee on Committee on Finance and Banking, Taxation and Customs Policy regarding this decision of the State Tax Service of Ukraine as well as organize a meeting with Mr. Oleksandr Klymenko Head of the State Tax Service of Ukraine and Mr. Sergiy Lekar, Deputy Head of the State Tax Service of Ukraine to discuss this and other significant letters of the STSU.

• VAT of the agency contracts.

Mr. Sergiy Shmeliov, Groupon UA Ltd outlined the difficulties with taxation of agency contracts faced by the company. Current Tax Code of Ukraine doesn’t provide for taxation of agency contracts in the part of only taxation agents commission but not the entire contract; therefore, companies have to pay the huge amount of VAT that impact on profitability.

• Other issues

Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC updated participants on planned legislative initiative developed by Mr. Sergiy Tigipko, Vice-Prime-Minister of Ukraine –Minister of Social Policy of Ukraine regarding transferring prices and informed that the relevant draft would be placed at the official web-site of the Ministry of Social Policy of Ukraine for public consideration.

Highlighting the progress of developing Draft Laws on “On Amendments to the Tax Code of Ukraine regarding Tax on Wealth” and “On Amendments to the Law of Ukraine on Mandatory State Pension Insurance Duty" (regarding Pension Contributions in Operations with Offshore Jurisdictions) Mr. Vlasov informed about the working groups meetings on these Draft Laws and reminded that, based on Chamber Tax Committee members proposals, Mr. Vlasov called for removing 20% duty on personal incomes.

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd also outlined a new legislative initiative developed by Mr. Arseniy Yatseniuk, Peoples Deputy of Ukraine concerning the Draft Law # 5889 dated December 14^th, 2011 “On Amendments to the Tax Code of Ukraine (concerning the establishment of a zero tax rate on incomes received by individuals in the form of compensated (deduct) Banks Ukraine bad loans for all types of loans)” and stressed on the necessity of this Draft Law adoption.

The next Chamber Tax Committee meeting is scheduled for Friday, January 20^th, 10:00AM.

The agenda will be as follows:

• Update on legislative initiatives related to the transfer prices by Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC.
• Update on tax initiatives developed under the chairmanship of Mr. Sergiy Tigipko, Vice-Prime-Minister of Ukraine – Minister of Social Policy of Ukraine, by Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC.
• Tax losses carry forward update, by Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd.

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svetlana Burlaka, Chamber Policy Officer (Committees).

During the previous meeting with the State Tax Service of Ukraine it was clarified that the tickets for EURO-2012 are considered to be goods but the Working Group participants made an assumption that tickets on the border of Ukraine should not possess value and thus should not imply liability for customs duty based on its final price.

The State Customs Service representatives informed that currently according to the State Tax Code of Ukraine and the Law of Ukraine “On Unified Custom Tariff” the tickets to the championship EURO-2012  are not exempt from taxation. Moreover, they informed that the Law of Ukraine “On Organizing and Holding the EURO-2012 Championship Finals in Ukraine” provides for simplified procedure of customs clearance of the items intended for preparation and holding of EURO-2012 but sponsor should obtain the UEFA’s assignee status from the Local Organizing Committee. In addition, according to this Law, the assignee has a right to import a number of goods without paying customs duty and VAT. The list of such goods is stipulated in the Draft Law #8443 “On the List of Items Exempt from Customs Duties in Connection with Organizing and Holding the EURO-2012 Championship Finals in Ukraine” which is at the moment under consideration of the Verkhovna Rada of Ukraine.

Please click here to view the background information on this issue provided by the representatives of the State Customs Service of Ukraine (UKR).

Participants were also informed about methods of defining customs value which could be used for defining value of tickets on the border of Ukraine, and discussed other issues.

If you or one of your colleagues would like to participate in the Chamber Working Groups on EURO-2012 Sponsorship Taxation Meetings and receive informational updates, please feel free to contact  Svetlana Burlaka, Chamber Policy Officer (Committees).

On Wednesday, November 30^th, 2011 the Chamber Tax Committee Meeting took place.

The agenda of the meeting included the following items:

• Discussion and approval of the Chamber Tax Committee request regarding the position of tax authorities on deductibility of royalties paid or payable to non-residents of Ukraine

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd. reminded participants that according to the State Tax Service explanation of Article 141.2 of the Tax Code of Ukraine, royalties paid or payable to non-residents of Ukraine regarding items of intellectual property rights which first appeared in Ukraine could not be included into losses.

Mr. Oleg Chayka also underlined that the primary aim of this article was to prevent allowance of royalties and inclusion it into losses in cases when royalties originally emerge in Ukraine and then the rights on items of intellectual property are transferred abroad, after which royalties are paid abroad and could be included into losses. Therefore, interpretation by the tax authorities does not correspond to the aim of this provision of the Tax Code of Ukraine. As a result, the Chamber position paper was developed.

Please click here to view the letter to the State Tax Service of Ukraine (UKR).

• Summary of the recently adopted Law of Ukraine #9341 dated October 10, 2011 “On Amendments to the Tax Code of Ukraine on Stimulating Investments into Ukrainian Economy”

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd. noted that Law of Ukraine “On Amendments to the Tax Code of Ukraine on Stimulating Investments into Ukrainian Economy” abolishes the requirement of advance tax payments when paying dividends in cases when a company is exempt from income tax. Also, the Law provides prolongation of a separate tax regime for insurance companies by the end of 2012.

• Update on the new governmental initiative to introduce a pension charge applicable to transactions with offshore jurisdictions

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd. informed participants that the Government had proposed to increase the list of offshore zones, the operations on which can be attributed to losses, and introduce 12% pension tax on transactions with offshore jurisdictions which will be legally mandated in draft amendments to the Law "On Mandatory State Pension Insurance Duty". This actually introduces a tax on expenditures which is not used in international practice.

The speaker also noted that customs authorities will prohibit export of goods or services to offshore zones if it is conducted without an official document confirming tax payment.

• Update on the situation with tax losses carry-forward

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd. mentioned that according to the position of the Parliamentary Committee of Ukraine on Finances, Banking, Taxation and Customs Policy, losses that are generated before the January 1^st 2011 may be attributed to losses of current tax periods cumulatively to the full repayment of negative value. However, Mr. Chayka also underlined that the position of the State Tax Service is the opposite. The speaker also noted that in judicial practice there are different solutions to this problem.

The speaker informed the participants that the American Chamber of Commerce had received a response from the Presidential Administration to the request on this issue. According to the response, this request is submitted to the Ministry of Finance of Ukraine for further consideration.

• Other issues.

Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd informed that in September 2011 the Chamber sent a letter to the State Tax Service for clarification of Article 199 of the Tax Code regarding the review of the share of fixed assets in taxable operations as a result of 12, 24 and 36 months of use. Due to the lack of response from the State Tax Service, KPMG representatives have prepared a set of documents for the legislative initiative on amendments to the Tax Code of Ukraine regarding this issue.

• Please click here to view the Draft Law “On Amendments to the Tax Code of Ukraine regarding the calculating of the Share of Fixed Assets in Taxable Operations as a Result of 12, 24 and 36 Months of Use” (UKR).
• Please click here to view the Explanatory Note (UKR).
• Please click here to view the Comparative Table (UKR).
• Please click here to view the draft Parliamentary Resolution “On Basic Approval of the Law “On Amendments to the Tax Code of Ukraine regarding the Review of the Share of Fixed Assets in Taxable Operations as a Result of 12, 24 and 36 Months of Use” (UKR).
• Please click here to view the draft Parliamentary Resolution “On Basic Approval of the Law “On Amendments to the Tax Code of Ukraine regarding the Review of the Share of Fixed Assets in Taxable Operations as a Result of 12, 24 and 36 Months of Use” (UKR).
• Please click here to view the letter to Mr. Vitalii Khomutynnik, Head of the Parliamentary Committee on Finance, Banking, Tax and Customs Policy on amendments to the Tax Code of Ukraine (UKR).

 If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svetlana Burlaka, Chamber Policy Officer (Committees).

Registration is required to attend.

If you or one of your colleagues would like to participate in the Chamber Working Group on EURO-2012 Sponsorship Taxation Meetings and receive informational updates, please feel free to contact Svitlana Burlaka, Chamber Policy Officer (Committees).

On Tuesday, November 15^th, 2011 Chamber Working Group on EURO-2012 Sponsorship Taxation meeting took place.

Participants of the meeting discussed a wide range of outstanding issues regarding purchasing tickets for EURO-2012 by sponsors, including:

• Procedure of official acquisition of the tickets by sponsors from the UEFA.
• Accounting for the operations of tickets purchases and disposal.
• Order of transition of the tickets across the border and their declaring.
• Taxation of tickets.
• Procedure and price for complimentary tickets purchasing.

It was agreed to invite representatives from the State Tax Service of Ukraine, SC “Derzhzovnishinform” and EURO-2012 Ukraine Local Organizing Committee to the next Working Group meeting.

Official EURO-2012 Sponsors decided to appeal to their UEFA account managers to draw UEFA’s attention to existing difficulties with taxation of EURO-2012 tickets purchases by the sponsors. 

On Wednesday, November 2^nd, 2011 Chamber Tax Committee Meeting took place.

 Please click here to view the Minutes of the meeting (ENG).

 The agenda was devoted to a number of questions, notably: 

1. Update on the status of the issue with pre-2011 tax losses by Mr. Slava Vlasov, PwC, Chamber Tax Committee Co-Chair and Mr. Oleg Chayka, KPMG-Ukraine Ltd., Chamber Tax Committee Co-Chair. 

Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC informed participants that Mr. Vitaliy Zakharchenko, Head of the State Tax Service of Ukraine believes that some tax losses may be exaggerated. Moreover, the STS is more interested in the quality of declared losses by companies of certain industries (for instance, banking sector with its reserves for internal transactions). However, the State Tax Service is unable to check the quality properly. 

Mr. Slava Vlasov called on the participants to use the Chamber as a platform for communication on this issue with the State Tax Service of Ukraine. Mr. Oleg Chayka noted that companies could appeal to the court when they receive decision notices that are sent to taxpayers according to Article 56 and item 1 of Article 58 of the Tax Code.

1. Update on the recent position of tax authorities on deductibility of royalties by Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd.

According to the State Tax Service of Ukraine, if license agreement was signed with non-residents after the section 3 of the Tax Code came into force (April 1^st, 2011), then royalty could not be included in total losses.

Ms. Elina Leshko, MTS Ukraine reminded participants that when royalties paid to nonresidents exceed 4% of sales income they could not be included in total losses.    Mr. Oleg Chayka also noted that royalty could not be added to total losses when paid to a nonbeneficial owner, except when beneficial owner grant this right to other individuals (including sublicensee).

1. Recent practices of the tax authorities on inappropriate assigning of high tax risk ratings to certain companies (for internal purposes of the tax authorities) by Mr. Volodymyr Vashchenko, Vashchenko, Bugay and Partners.

Mr. Volodymyr Vashchenko, Vashchenko, Bugay and Partners informed participants that the State Tax Service has started to take formal notes of remote document audit of intermediaries without notification. There have been examples when due to remote document audit all company’s contracts were considered to be no-account, therefore tax credit was annulled.

During the discussion Mr. Oleg Chayka proposed to use symmetric rule as it is used in Western Europe, when a taxpayer has to pay a certain fee for the late payment; the same happens when the State Tax Service does not provide a refund VAT on time, it has to pay a fee. Participants agreed that the draft law as an amendment to the Tax Code should be made including the provisions on when the State Tax Service is obliged to charge a penalty on itself and pay it.

The participants have also discussed the issue of unscheduled inspections. It was decided that the STS should establish a claim for such inspections.

1. The Order of the State Tax Service of Ukraine on transferring of the large taxpayers to be regulated by another State Tax Service office by Ms. Elena Belousova, McDonald’s Ukraine Ltd.

Ms. Elena Belousova, McDonald’s Ukraine Ltd informed the attendees on behalf of McDonald’s supplier Uspot about its fears of transferring large taxpayers to register at other State Tax Service offices. Ms. Belousova stressed that taxes are imposed only upon revenue side of the budget, while expenditure side of the budget is not taken into consideration. Having large transactions, Upsot has both revenues and expenditures; therefore, it will have enormous tax burden when tax is based only on its revenue side.

1. 5.      Update on the latest tax issues clarifications provided by the State Tax Service of Ukraine by Mr. Igor Dankov, PwC.

Mr. Igor Dankov, PwC shared with participants information about recent letters from the state tax authorities.

Please click here to download the presentation.

Among other issues,  participants discussed the obligation to specify the code of the Ukrainian classification of foreign economic activity goods (UC FEAG) for imported excisable goods.

Moreover,  Committee members have expressed their deep concern about reliability of communication channels of STS during electronic transmission of tax bills. It was proposed to submit tax invoices with one large register. 

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svetlana Burlaka, Chamber Policy Officer (Committees).

On Wednesday, September 21^st, 2011 Chamber Tax Committee held its regular meeting.

To download the Minutes of the meeting please click here 

The meeting was devoted  to a number of questions, notably: 

1.  Update on the letter of the State Tax Service of Ukraine #11329/6/15-0516 of 18.06.2011, by Mr. Ivan Yurchenko, Chamber Tax Committee Secretary, Vasil Kisil & Partners. 

Mr. Ivan Yurchenko highlighted the consequences and obstacles in fiscal accounting for security brokers that the letter may cause. Participants decided to appeal to the State Tax Service of Ukraine for clarification in this issue.

2.  Update on the issues related to the transfer prices and joint responsibility of taxpayers for VAT, by Mr. Slava Vlasov, Chamber Tax Committee Co-Chair, PwC. 

Mr. Slava Vlasov informed about the meeting of the Chamber Agricultural Committee with Mr. Vitaliy Zakharchenko, Head of the State Tax Service of Ukraine. To learn more about the Chamber Agricultural Committee meeting, please click here.

Mr. Taras Koval outlined the need to replace new tax invoice form with the previous one excluding the ‘imported goods’ box. He also mentioned that beginning from January 1, 2012 a new regulation comes into force – an obligatory registration of tax invoices for UAH10,000 and more.

Ms. Khrystyna Stelmakh, Cargill also briefed on how the dialogue progressed as well as on the results of the latest meetings with the State Tax Service. For more information please click here.

Then Mr. Slava Vlasov outlined the legislative initiative on the transfer prices similar to the one adopted in Russia which provided for recognizing of the consolidated group during taxation and non-application of transfer prices.

3.  Consideration of a tax ruling request on an important VAT issue, by Mr. Oleg Chayka, Chamber Tax Committee Co-Chair, KPMG-Ukraine Ltd.

The discussion was devoted to Article 199 of the Tax Code of Ukraine, in particular, the calculation of the VAT adjustment of credits and intangible assets purchase, recalculation of tax credits, etc. It was decided to submit a tax ruling request on VAT on behalf of the Chamber Tax Committee to the State Tax Service of Ukraine. Please click here to view the Letter (UKR).

4.  Difficulties Ukrainian banks are facing that are caused by the request of the State Tax Service Ukraine not to include negative profits for 2010 in tax declaration, by Ms. Larysa Sultanova, OTP Bank.

Ms. Larysa Sultanova highlighted current misunderstanding between the State Tax Service of Ukraine on the one hand and banks on another with regard to the issue of declaring previous years losses. The discussion was focused on the correlation between Article 150 of the Tax Code of Ukraine and the letter of the State Tax Service of Ukraine. It was agreed to elaborate the Chamber Position and address high level state officials on this issue.

5.  The discussion that followed was devoted to the issues of environment tax payers, in particular, the process of obtaining a special license to waste disposals. It was decided to send a request on behalf of the Chamber Tax Committee to the Ministry of Environment and Natural Resources of Ukraine. Please click here to view the letter that was sent to the Ministry of Environment and Natural Resources of Ukraine (UKR).

Mr. Andriy Suchyk, GlobalLogic Ukraine, Co-Chair of the Chamber IT Committee raised the tax and accounting issues in IT industry regarding royalty, tax amortization, know-how expenses, etc. He also stressed the need to amend national accounting and taxation standards, in particular, the Draft Law #6287 in the part of IT industry taxation.

Mr. Andryi Suchyk also informed on the establishment of a separate Working Group to compile the list of problematic issues in this area and elaborate Chamber position on relevant amendments to the Tax Code of Ukraine. 

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svetlana Burlaka, Chamber Policy Officer (Committees).

On Friday, July 22^nd, 2011 the Chamber Tax Committee held its regular meeting, devoted to the discussion of a number of questions: long and short term action plan of the Committee, recently adopted amendments to the Tax Code of Ukraine, as well as other tax related issues. 

At the beginning of the meeting the participants were updated on the Committee action plan included in the draft 2011 Chamber Partnership and Competitiveness Report. 

To download the draft, please click here (ENG). 

Please keep in mind that you have to be logged into the Chamber SharePoint prior to accessing the documents. In order to access the document, please enter you login and password, then return to the Update and click the link. 

We would like to encourage you to provide feedback to the draft by Friday, August 5, 6PM. 

The Chamber Tax Committee Leaders, Mr. Slava Vlasov, PwC, and Mr. Oleg Chayka, KPMG-Ukraine Ltd., discussed with the members of the Committee further strategy of cooperation with the governmental authorities and agreed the following: 

1. to continue ongoing cooperation with the Parliamentary Committee on Finance, Banking Activity, Tax and Customs Policy, focusing on getting information about plans of the Committee and other government authorities in regards to amending the Tax Code of Ukraine;
2. to initiate cooperation with the judicial institutions, including Supreme Administrative Court, in order to influence the general practice of trials relating to tax matters;
3. to join forces of the Chamber Committees to lobby for common initiatives that could contribute to improving the investment climate, such as: issues regarding economic indicators that exist for monopolistic purposes, modernization and simplification of currency regulation (draft Law of Ukraine “On Currency Regulation and Currency Control”), limitations of corporate law;
4. to focus on some short-term goals, realization of which will definitely simplify the tax accounting and will not lead to the shortfall of the budget. They are the following:

• abolition of tax invoices,
• definition of the object of taxation for profit taxes;
• adoption of the annual accounts for profit taxes. 

We would like to encourage you to provide feedback to the strategic and priorities of the Chamber Tax Committee by Friday, August 5, 6PM. 

Mr. Oleg Chayka updated the participants on the Law of Ukraine # 8217  “On Amendments to the Tax Code of Ukraine and Some Legislative Acts of Ukraine (On Improvement of Certain Provisions of the Tax Code of Ukraine)”, passed in the second reading on July 7^th, 2011. He touched upon the most important changes introduced in the Code, such as: 

• re-introduction of public tax clarifications;
• cancellation of tax guarantees;
• changing the definition of a monetary obligation to enable the tax authorities to penalize for failure to comply with a number of non-fiscal requirements;
• cancellation of tax penalties for overstating tax losses, although the tax service can still penalize for mere overstating VAT refunds (credits); 
• enabling the tax authorities to adjust tax losses ;
• changing the definition of a permanent representation;
• permission to include capital contributions in the cost base of shares or corporate rights in determining the amount of capital gains realized on the disposition of shares or corporate rights
• other tax changes. 

The Chamber Tax Committee Co-Chairs and participants of the meeting discussed the tax related problems faced by their companies, as well as possible ways of solving such problems.

Mr. Oleg Chayka updated the Committee members on the recent letter of the Superior Administrative Court of Ukraine on the legal form and economic substance of transactions that clarifies the requirements for primary documents and business transactions. He specified the main possible negative consequences of the execution of certain provisions of this letter, including the following: 

1. requirement that expenses shall actually be made and supported by all primary documents (including banking and payment documents) before they can be legitimately deducted for corporate income tax purposes and before the relevant input VAT credits can be claimed.   This position can affect the taxpayer’s right to deduct expenses on accrual basis;
2. position of the court that a transaction structured with the sole purpose of deriving a tax benefit should lack business purpose. In fact, tax benefits result in the additional economic benefits and savings for the taxpayers, and as such already represent a valid business purpose of any transaction. The Tax Code does not have any special tax provisions or general anti-avoidance rules that would enable the court to make such conclusion. It appears that by introducing this additional requirement for claiming expenses for tax purposes, the court exceeded its powers of only interpreting and applying the laws. 

The participants decided to draft proposals to the Superior Administrative Court of Ukraine asking to change clarifications given in the letter. 

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Svetlana Bykova, Chamber Committee Coordinator.

On April 20^th the Chamber Tax Committee Meeting was held with the agenda devoted to reviewing the activities of the Chamber-State Tax Administration Working Group. Mr. Slava Vlasov, PricewaterhouseCoopers, the WG Co-Chair, updated the participants on the new order of responses to be provided by the Tax authorities which stipulates that the repliers should be given in response to individual requests from the companies rather than to requests from business associations like the American Chamber of Commerce or the EBA. However, it was agreed that activities of the Working Group will continue and concentrate on systemic tax issues affecting all the members’ interests.

The VAT-related issues raised by the Telecom Committee leadership will also be considered for inclusion into the next meetings agendas.

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Yaroslav Voitko, Chamber Policy Manager.

On Wednesday, March 23, 2011 the Chamber Tax Committee held its regular Meeting.  

1-2. Opening the Committee Meeting, Mr. Slava Vlasov, Head of the Chamber Working Group on the Tax Code, PricewaterhouseCoopers updated the Members on the In-focus meeting held with the State Tax Service Head Mr. Vitaliy Zakharchenko on February 21, and on the Round Table with ‘Expert’ magazine at the Parliament Committee on Taxation and Customs Policy with Mr. Vitaliy Khomutynnyk, Head of the Committee, held on February 23. Mr. Vlasov informed that an agreement had been reached that the Tax Code amendments would be introduced by June and the Chamber’s position and proposals would be taken into account to the extent possible.

To see the Proposals of the Round Table Participants please click here. 

3. Mr. Vlasov has also informed on the first meeting of the Chamber-STS Working Group Meeting held on March 2, 2011, including the issue on registration with tax authorities of residents as a permanent establishment of non-residents. It was agreed that the next WG meeting will be held on April 6, 2011. 

4. While discussing a number of Tax Committee position papers submitted to the State Tax Service at the end of February and the beginning of March, the participants of the meeting requested the Chamber to follow up with the STS on these letters. Mr. Yaroslav Voitko, Policy Manager, promised to do so and inform the Committee Members in due course. 

Please click here to download the Chamber position on beneficial ownership concept. 

Please click here to download the Chamber position on penalties under the Tax Code of Ukraine. 

Please click here to download the Chamber position regarding providing clarifications on confirmation of types of activity of individuals – entrepreneurs. 

Please click here to download the Chamber position regarding deductibility restrictions in the Tax Code and non-discrimination provisions of the Double Taxation Treaties. 

5. Mr. Yaroslav Voitko, Chamber Policy Manager, has informed the meeting participants on the results of the survey on Tax Code Assessment. It was agreed that the survey should be repeated, as 10 responses only did not represent a sufficient sample for assessing the results. 

6. Mr. Oleg Chayka, Chamber Tax Committee Secretary, KPMG informed the Committee Members on the tax implications of business spin-off. 

7. It was agreed to hold the next meeting of the Committee on Wednesday, April 20, 2011. 

Please keep in mind that you have to be logged into the Chamber SharePoint prior to accessing the documents. In order to access the document, please enter you login and password, then return to the Update and click the link. 

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Yaroslav Voitko, Chamber Policy Manager.

On Wednesday, February 16, Chamber Tax Committee held its regular Meeting. 

Opening the Committee Meeting, Mr. Slava Vlasov, Head of the Chamber Working Group on the Tax Code, PricewaterhouseCoopers and Co-Chairs of the Chamber Tax Committee updated the Members on the Meetings held at the State Tax Service of Ukraine and at the Parliament Committee on Taxation and Customs Policy. Both Meetings were aimed at establishment of the Special Joint Working Groups to discuss more specifically tax issues including arising from the Tax Code implementation. 

They appealed to the participants to be active in sharing problems they face in the tax sphere and comments on the Tax Code. The latter concerns will be presented to the state authorities via the established channels. 

Further Ms. Maria Bondarovets, Avon commented on the Draft Chamber position prepared by her aiming to address the Pension Fund to clarify the document, which will be a sufficient basis for enterprises, institutions and organizations which conclude civil agreements with individuals – private entrepreneurs, for matching the executed works/services with the types of activities of private entrepreneurs within the meaning of Article 4 of the Law of Ukraine “On Collection and Accounting of Unified Payment on Mandatory State Social Insurance”. 

Mr. Oleg Chayka, Chamber Tax Committee Secretary, KPMG informed the Committee Members on the Letter of the State Tax Service “On Application of Penalties” dated February 3, 2011 and on VAT issues, which arise in regards to the import of consultation services. 

Finally participants were updated on recent positions, drafted by the Chamber Tax Committee Members: on deductibility of royalties, consulting fees, engineering fees under the Tax Code; on issues related to application of penalties under the Tax Code; on beneficial ownership concept.

Please click here to download Minutes of the recent Chamber Tax Committee Meeting, held on February 16, 2011.

Please keep in mind that you have to be logged into the Chamber SharePoint prior to accessing the documents. In order to access the document, please enter you login and password, then return to the Update and click the link.

If you or one of your colleagues would like to participate in the Chamber Tax  Committee Meetings and receive informational updates, please feel free to contact Olena Lukianenko, Chamber Senior Committee Coordinator.

On Wednesday, January 19^th Chamber Tax Committee held its regular Meeting. 

The biggest part of the Meeting was dedicated to one of the most anticipated topics of the day – Tax Code. 

Participants shared their concerns and interpretations of certain provisions of the document: 

• Mr. Oleh Marchenko, Co-Chair of the Chamber Tax Committee, Ulysses noted that provisions regarding deductibility of royalties, consulting fees, engineering fees under the Tax Code can be considered as discriminatory under nondiscrimination clauses of tax treaties of Ukraine and suggested to address State Tax Administration of Ukraine. 

As well he mentioned that Article 123 of the Tax Code entitled “Penalties in case controlling body defines the sum of tax commitment” which envisages penalties in the amount of 20%, 50% and 75% of the sum of tax liability, is not clear and it needs clarification. 

• Mr. Oleg Chayka, Secretary of the Chamber Tax Committee, KPMG stressed the impact of subsection 198.5 of the Tax Code on professional services business. 

Moreover he emphasized that the definition of beneficial owner under Article 103 of the Tax Code needs to be cleared up. 

Finally, participants took the decision to prepare a couple of official letters of the Chamber aiming to resolve the abovementioned challenging provisions.

Please click here to download Minutes of the recent Chamber Tax Committee Meeting, held on January 19, 2011.

Please keep in mind that you have to be logged into the Chamber SharePoint prior to accessing the documents. In order to access the document, please enter you login and password, then return to the Update and click the link.

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Olena Lukianenko, Chamber Senior Committee Coordinator.

Starting the Committee Meeting, Mr. Ivan Yurchenko, Co-Chair of the Chamber Tax Committee, Vasil Kisil & Partners and Mr. Oleh Marchenko, Co-Chair, Ulysses stated that on December 2, 2010 the Tax Code with amendments incorporated by the President of Ukraine was adopted by the Parliament. It was published on December 4, 2010 in the newspaper “Golos Ukrainy”. 

The Chamber did its best to lobby interests of the Chamber Members and most of the Chamber proposals were incorporated into the final document. However, there are challenging provisions, need to be modified, particularly unfair VAT treatment of several industries; unreasonable prohibition or limitation of deductibility of business related costs; VAT payable by new businesses at start-up phase (which becomes extra cost for business) etc.  

Committee Leaders admitted that the Tax Code is a huge document to read and to investigate, thus the Chamber Tax Committee and the Chamber Working Group on the Draft Tax Code will continue to provide substantial comments in the specified format of comparative table (current version – suggested version - substantiation). 

The Chamber will as well educate the Members and explain provisions of the Tax Code via the special Chamber Knowledge Seminars, which will be held in upcoming weeks. 

Further Mr. Ivan Yurchenko, Co-Chair of the Chamber Tax Committee, Vasil Kisil & Partners outlined main risks in regards to denunciation of Convention with Cyprus under the Draft Law #7091 “On Denunciation of Agreement on Avoidance of Double Taxation of Income and Assets with Republic Cyprus”. It was agreed to focus on this issue during the next Committee Meeting. 

In regards to taxation of payments under lease agreements with the single social tax starting from 2011, Ms. Nataliya Chernenko, OTP Bank JSC analyzed the provisions of the Law #2464 (Draft Law #6525) “On Collection and Accounting of Single Social Payment” and volunteered to elaborate the position in regards to the most problematic moments.

Please click here to download Minutes of the recent Chamber Tax Committee Meeting, held on December 8, 2010.

Please keep in mind that you have to be logged into the Chamber SharePoint prior to accessing the documents. In order to access the document, please enter you login and password, then return to the Update and click the link.

If you or one of your colleagues would like to participate in the Chamber Tax Committee Meetings and receive informational updates, please feel free to contact Olena Lukianenko, Chamber Senior Committee Coordinator.