• Limitation of Interference in the Activities of Business Entities
  • July 31, 2014
  • Law Firm: Dentons Canada LLP - Toronto Office
  • On 1 July 2014 the Ministry of Revenues and Duties of Ukraine adopted a number of Summarizing Tax Consultations:

    Order No. 367 dated 1 July 2014 approved the Summarizing Tax Consultation on tax accounting of repayable financial assistance (Order No. 402 dated 8 July 2014 introduced changes and amendments to the Summarizing Tax Consultation);

    The Consultation clarifies the procedure for tax accounting of receipt and return of repayable financial assistance to income tax payers with annual/quarterly basic reporting period, as well as in case of a taxpayer’s switch to the simplified taxation system before or after the receipt of repayable financial assistance.

    In particular, it explains that repayable financial assistance received from a non-payer of income tax during the period of time when a special taxation regime was applied to the taxpayer (payment of the single tax or fixed agricultural tax) and remained outstanding as of the day of the taxpayer’s switch to the general taxation system shall not be included in the taxpayer’s income and in the expenses on its return.

    Order No. 366 dated 1 July 2014 approved the Summarizing Tax Consultation on the costs of warranty repair (maintenance) or warranty replacement of goods;

    The Consultation explains that the costs associated with warranty repair (maintenance) or warranty replacement of goods with respect to which the seller’s warranty obligations have been declared shall be taken into account by the taxpayer ¿ seller when determining the object of the income tax subject to proper record of purchasers who received such replacement of goods or repair (maintenance) services regardless of their status (natural persons or legal entities) in the manner prescribed by the Procedure for record of purchasers who received a warranty replacement of the goods or warranty repair (maintenance) services approved by Order No. 1263 of the Ministry of Finances of Ukraine dated 03 December 2012, and confirmation of such expenses by duly executed primary documents.

    Order No. 368 dated 1 July 2014 approved the Summarizing Tax Consultation on certain matters concerning application of the rules of tax legislation concerning transfer pricing which restates the Summarizing Tax Consultation on certain matters concerning application of the rules of tax legislation concerning transfer pricing approved by Order No. 699 dated 22 November 2013;

    Thus, unlike the previous version of the Summarizing Tax Consultation, it explains that in determining the 50 million criterion of controlled operations (matter 2) amounts of credits, deposits, loans, repayable financial assistance, dividends, investment cost shall not be taken into account.