RESTRICTED
WORLD TRADE WT/ACC/UKR/48
21October 1997
ORGANIZATION(97-4591)
Original: English Working Party onthe
Accession ofUkraine
ACCESSION OFUKRAINE
Summary oftheTaxation Legislation ofUkraine
TheGovernmentalCommissiononUkraine'sAccessiontotheWTOhassubmittedthefollowing
summary ofthetaxation legislation ofUkraine withtherequest thatitbecirculated tomembers of
theWorking Party.
_______________
Thetaxation system inevery country isacoreoftheeconomic system. From onehand it
provides financial baseoftheStateandfromanother -itisthemaininstrument intheimplementation
ofthestateeconomic policy.
Thetaxation system isacombination oftheestablished country taxes, feesandpayments which
areinterconnected between themselves andsupplement eachother buthavedifferent objectives.
Taxation isnotonlythemethod ofensuring incomes tothebudget, butalsoaninstrument of
theState’sinfluence atthedifferent sides ofthetaxpayers ’activity.
Having determined itseconomic policy, theStatedetermines thedirection ofthedevelopment
andalsostrategy andtactics toachieve adefined objective. Thatiswhythetaxation system andtaxation
policy isstrictly oriented toresolve specific problems andissues. Taxes intheStateshallbecome the
mainkeyinstrument oftheStateregulation oftheeconomy, ensuring income tothebudget, stimulating
scientific andtechnical progress, withstanding increase ofprices andinflation.
Thetaxation system shall ensure constant andstable incomes tothebudget andprovide
possibilities totheStatetoinfluence allsides ofthesocial andeconomic development ofthesociety.
Thetaxation system shallinclude taxesproviding stable financial conditions intheStatewithout
whichtheStatewouldnotbeabletoconstantlyfinanceitsexpenses.Thebestinstrumentsforthispurpose
areindirect taxes (value added tax,excise duty, customs duty) andalsosuchdirect taxes astaxon
profits oftheenterprises, profit taxfrom citizens, payment forland.
Every legalornatural person isobliged toparticipate infinancing State expenses bypaying
taxes, feesandother obligatory payments determined bythetaxation legislation.
Thebasicprinciples ofthetaxation system ofUkraine weredetermined bytheLawofUkraine
"OntheTaxation System" adopted bytheSupreme RadaofUkraine on18February 1997. Thetaxation
system consists offollowing principles:
(i) stimulation oftheentrepreneurial activity andinvestment activity;
(ii) obligatory nature;
(iii) social justice;WT/ACC/UKR/48
Page2
(iv) proportionality andequal distribution;
(v) equality andnotallowance ofanytaxation discrimination;
(vi) stability;
(vii) economic validity;
(viii) measured payment;
(ix) competence;
(x) unified approach tothedevelopment ofthetaxation legislation;
(xi) flexibility;
(xii) inflation neutrality;
(xii) economic efficiency;
(xiii) administrative facility;
(xiv) availability andunderstanding ofthetaxation legislation norms tothetaxpayers.
Taxes areaspecial form offinancial relations between theState andmembers ofthesociety
andareobligatory payments ofthelegalandnatural persons tothebudget.
According totheeconomic definition taxes areacertain typeoffinancial relation between the
Stateandtaxpayers withthepurpose ofestablishing national centralized fundofthemonetary resources
essential forthestatetofulfill itsfunctions.
Infinancial terminology there arethree terms which reflect payments -payment, allocation,
andtax.
Payment: means relations ofthepayer withtheState. Itsamount depends upon thevolume
oftheState owned resources utilized bythepayer .
IftheStatelosesitsrightofownership oftheseresources, thenitwilllosetheabove mentioned
payments.
Payment maybemade bothbyincluding itintothecostandfrom theprofit. Thisprovision
isdetermined bythecurrent legislation ofUkraine.
Taxation system ofUkraine includes following payments:
- payment forland;
- payment forthetrade patent forcertain types oftheentrepreneurial activity;
- rentpayments.
Allocations: provide utilization ofpayments forspecial purposes. Utilization ofthese assets
canbeeither fullorpartial inaccordance withthepurpose. Forinstance, feesforthegeological
exploration performed attheexpense oftheStatebudget havepartial utilization forspecial purposes:
- feeforthespecial utilization ofthenatural resources;
- feeforthedeterioration oftheenvironment.
They areallocated intotheState budget .Theincomes loose itsspecial utilization purposes,
theybecome partofthebudget.
Along withthis,financing from thebudget forthegeological exploration andregeneration
ofthenatural resources canbeactually larger orsmaller thaninitial allocations.WT/ACC/UKR/48
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Theexample ofthefullutilization ofassets forspecial purposes isallocation tothenational
funds.
National funds include:
(i) fund onliquidation oftheresults oftheChernobyl disaster andsocial protection ofthe
population;
(ii) fundofthesocial protection ofthepopulation;
(iii) pension fund;
(iv) State innovation fund;
(v) fundonassistance totheunemployed population.
Utilization oftheassets ofthese funds notforspecial purposes isnotallowed.
Allocations, ingeneral, areincluded intothecost,butcanbealsomade from theprofit.
Taxes andfees:aresupporting State functions andfinancially ensure fulfillment oftheState
functions -governing, social andeconomic protection.
Taxes arecollected bytheState tofinance theexpenditure oftheState asdeemed bythe
government.
Taxes arepayments ofthesociety totheStateforthefulfillment ofitsfunctions andallocation
ofthepartofthevalue ofthegross national product forthenational needs. Without meeting these
needs modern society cannot exist.
Simultaneously, itshould bementioned thatifpayment andallocations canbepaidbothto
theState andlegalornatural persons, thantaxes areapriority oftheState andthatiswhytheyare
transferred onlytothebudget.
Alltaxes aresubdivided intodirect andindirect taxes.
Indirect taxes (value added tax,excise duty, customs duty) shallbeincluded intotheprice of
goods andfinally paidbythebuyer butnotbytheproducer ofgoods.
Direct taxes -taxes onprofits ofnatural andlegalpersons.
Fromthepointofviewoftheinfluenceattheeconomicdevelopmentdirecttaxesaretraditionally
connected withtheireffect ontheeconomic andentrepreneurial activity, indirect -withtheirinfluence
onprices.
Incomes tothebudget include agroup ofthenon-tax payments. Difference between themand
taxes issimple andarises from theirfunctions.
Taxes areafiscal instrument providing incomes tothebudget andnon-tax payments donot
havesuchafunction.
Thus, forinstance, profits fromthesaleoftheconfiscated property havelegalbutnotfinancial
meaning.WT/ACC/UKR/48
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Taxation terms andconditions provided bytheLawofUkraine "Ontaxation system" andcurrent
legislation ofUkraine concerning definite types oftaxesandobligatory payments isabasisforincomes
tothebudgets ofalllevels.
Influence attheincomes totheUnified Budget ofUkraine for1997 ofthecurrent taxation
system, taking intoaccount separate legislative actsadopted inthecurrent year, canbeestimated by
thefigures oftheState Budget ofUkraine for1997 adopted bytheSupreme Rada ofUkraine on
27June1997.
Incomes totheUnified Budget ofUkraine in1997aredetermined based onthemainforecasting
macro indicators oftheeconomic andsocial development ofthecountry forthisyear. Measures on
improving payment oftaxes, feesandother obligatory payments arealsotaken intoaccount.
Ondefinite types ofprofits Laws ofUkraine andResolutions oftheGovernment, amendments
tothecurrent legislation andindexation ofrateswere alsotaken intoaccount.
Incomes tothebudgets included intothebudget system ofUkraine in1997 amount to
30429.3 million UHR which comes to30.3percentofthevalue ofthegross domestic product vs.
36.3percentprovided in1996 (excluding pension fund) and28.6percentonfinalfigures forthis
period.
STRUCTURE OFTHEPROFITS OFTHECONSOLIDATED BUDGET OFUKRAINE FOR1997
- customs duty-2.2percent;
- payment (tax)forland-3.1percent;
- excise duty-3.5percent;
- allocations andfeesforconstruction, reconstruction, repair andmaintenance ofthegeneral
automobile roads -3.5percent;
- feesandother non-tax profits -4.4percent;
- rentpayment foroilandnatural gasmined inUkraine anddifference inprices fornatural gas
-5.1percent;
- fundonliquidationoftheresultsoftheChernobyldisasterandsocialprotectionofthepopulation
-8.3percent;
- allocation ofassets from theState Committee onmaterial reserves -9.0percent;
- other -9.2percent;
- profit taxfrom citizens -11.4percent;
- taxonprofits oftheenterprises andpayment forthetrade patent forseparate types ofthe
entrepreneurial activity -12.5percent;
- value added tax-27.8percent.
INDIRECT TAXES
Value added tax-national taxwhich isoneofthemainsources oftheincome tothebudget.The
VAT percentage inthetotalamount ofincomes dropped from27.8percentin1997(with thetaxrate
equal to20percent) to34.7percentin1993 (with thetaxrateequal to28percent). Theabsolute
figure ofthetaxintheStatebudget for1997 wasconfirmed intheamount of8456.0 million UHR.
Thepercentage ofthevalue added taxintheconsolidated Budget ofUkraine forthenumber
ofyears shows thestability ofthissource ofincomes.WT/ACC/UKR/48
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Value added taxinUkraine wasintroduced fromthe1January 1992 andreplaced theearlier
existing turnover taxandsalestaxwhich werelevied based onthesystem oftheplanned andcentralized
prices.
Introduction ofthenewtypes ofindirect taxes (value added taxandexcise duty) firstofall
isconnected withthenecessity toprovide essential andstable incomes tothebudget under conditions
ofthewideliberalization ofprices andexpanding inflation processes.
While existing taxes (onturnover) were generally based onthecompulsory maintenance of
thecertain levelofprofitability anddidnotcontradict withthemechanism ofexpenses andhadlimited
taxation base(taxonsales), thevalue added taxischaracterized asanessentially effective taxation
instrument.
Ifweconsider thevalue added taxsystem inother countries oftheworld aseffective regarding
stable incomes tothebudget, neutrality, non-aggressiveness andself-government, thenlegislation of
Ukraine onvalue added taxhaspositive features yet(quite widetaxation baseandadequate tothemarket
circumstances andinflation conditions which provides evenintheeconomic recession stable incomes
tothebudget) requires substantial changes inpresent.
Percentage oftheValue Added TaxintheTotal Incomes for1994-1997
1994 -30.3percent; 1995 -27.5percent; 1996 -27.2percent; 1997 -27.8percent.
ThatiswhyUkraine, which intends toenterinthefuture European Community, hasdeveloped
newways ofdetermining value added tax,onthebasis ofthemain principles (sixth directive ofthe
European Union) ofthistaxintheWestern European countries which willgiveanopportunity toprevent
mistakes which existed when introducing thistaxinthese countries.
NewLawofUkraine "OnValue Added Tax"signed bythePresident ofUkraine inthemonth
ofMayofthecurrent yearisastepforward incomparison withexisting legislation oftheState and
themajority oftheCIScountries.
According tothisLawvalue added taxisataxontheconsumption ofgoods (works, services)
inthecustoms territory ofUkraine anditshallbepaidbyevery agent (either legalornatural person)
whoareconsuming these goods (works, services) regardless oftheorigin ofgoods.WT/ACC/UKR/48
Page6
Moreover, consumers, when registered aspayers ofthetax,havetherighttoremunerate their
expenses onpaidtaxattheexpense ofthetax,received from thebuyer oftheproduced goods.
Suchpayment oftaxprovides thatevery seller allocates tothebudget onlytheamount oftax
calculated attheadded (created) value inthecourse ofproduction (turnover).
Itisextremely important forthebudget thatwhen goods aremoving through allstages of
processing allconsumers andprocessors shallpaytaxes before thefinalconsumer ofgoods (works,
services).
Inthissituation thebudget willalways receive assets when fulfilling anysalesandwilltimely
andproperly compensate amounts ofthetax.
Value added taxisfunctioning effectively regularly mobilizing essential assets tothebudget
provided thattaxiscalculated andpaidwhen goods areconsumed. Itmeans thattaxation obligations
arearising when goods aretransferred totheconsumer, butnotwhen consumer actually paidforgoods
(works, services).
Under conditions ofthecurrent legislation consumers ofthematerial resources whoproduce
goods (works, services) andsellthem arereceiving taxfrombuyers andleave itintheirdisposal till
theendofthetaxation period under review.
Norms andprocedures ofthecalculation andpayment ofthevalue added taxprovided bythe
LawofUkraine "OnValue Added Tax"of3April 1997differ substantially fromthecurrently existing
Decree oftheCabinet ofMinisters ofUkraine of26December 1992 No.14-92 "OnValue Added
Tax" bothinthestructure oftheLaw, style, terms andtheprocedure ofthecalculation, payment of
thetaxtothebudget andbudget allocations.
TheLawconsists ofeleven articles which determine categories ofthevalue added taxpayers,
subjects, taxation baseandrates, listofnontaxable andexempted fromthetaxtaxes export andimport
operations, procedure ofthespecial registration ofthevalue added taxpayers, determination ofthe
taxcredit andtaxobligations.
Specific Features oftheAbove Mentioned Law
1. According totheinternational norms ofthecollection ofthevalue added tax,special registration
ofthevalue added taxpayers intheStatetaxadministration bytheplace oftheirlocation wasintroduced
attheterritory ofUkraine withthepurpose ofreceiving registration certificate ofthevalue added tax
payer andpersonal identification number ofthevalue added taxpayer which willallow toestablish
unified databaseofthetaxpayers.
Along withthis,registered asavalue added taxpayer, person receives therighttocalculate
taxandexecute taxnotewhen selling goods, works, services regardless oftheirorigin. Taxnoteissued
bytheseller tothebuyer provided thattheyareregistered astaxpayers andhavepersonal taxnumbers
isadocument which gives therighttothepayer toinclude intothetaxcredit expenses ontaxpayment.
2. Article 3ofthenewLawprovides aunified procedure forthecalculation andpayment ofthe
value added taxforallcategories ofpayers regardless ofthecurrency ofsettlements (foreign ornational),
except specific features oncommission trade, according tothedecree oftheCabinet ofMinisters of
Ukraine, when thesaleismade atthecustoms territory ofUkraine, afewsubjects shallbeusedto
taxwithvalue added tax.Thus, according tothecurrently validDecree, subject totaxes inproducing
enterprises isturnover onsoldgoods, fulfilled works andrendered services intrade, purchasing,WT/ACC/UKR/48
Page7
wholesale, supplying, selling andother enterprises which render intermediate services -difference
betweenpricesofthesoldgoods(works,services)andpricesusedforsettlementswithsuppliersincluding
amount ofthevalue added tax.Persons involved inentrepreneurial activity without anestablished legal
person forthecalculation ofthevalue added taxareusing thirdtypeofthetaxsubjects, namely,the
difference between theamount ofthesalesproceeds andmaterial expenses including value added tax
which were actually made toproduce indicated goods (works, services).
3. Thenewapproach wasestablished when determining categories ofthevalue added taxpayers
which willallow towidely draw inallpotential value added taxpayers. Thus, theLawprovides that
thevalue added taxpayer isnotonlyanagent (both legalandnatural) ofentrepreneurial activity, but
alsoanother legal person, notagent oftheentrepreneurial activity, provided thatthevolume ofits
taxable operations onthesaleofgoods (works, services) within anyperiod fromthelasttwelve calendar
monthsexceeds600nontaxableminimumsofthecitizensincomes(atpresentitamountsto10,200UHR).
Such restrictions onthesalesvolumes ofgoods arenotcovering persons which arecarrying
outentrepreneurial activity atthecustoms territory ofUkraine andtrading withcash.
Anagent oftheentrepreneurial activity whohasnotestablished legalentity (natural person)
whotrades forcashstarting from 1July1997 willnotpayvalue added taxprovided thathethepaid
market feeaccording totheprocedure determined bythelegislation.
Besides, starting from1Julyofthecurrent year, category ofthevalue added taxpayers will
include entities which perform atthecustoms territory ofUkraine services connected withthetransit
ofpassengers orcargo through thecustoms territory ofUkraine.
When importing goods intothecustoms territory ofUkraine orreceiving fromnon-residents
services (works) tobeusedorconsumed attheterritory ofUkraine, anyperson importing (receiving)
indicated goods, including citizens whoimport goods intaxable amounts, willbeincluded intothe
category ofthetaxpayers.
4. Tocalculate value added taxtheLawprovides twotaxratesamounting to20percentandzero
rate.
Zerorateisusedwhen calculating value added taxwhen goods (works, services) aresoldfor
export (except saleofgoods, works, services exempted fromtaxation according tothearticle 5),sale
ofthecoalandconcentrating itproducts, coalandpeatbriquettes andalsowhen selling energy tothe
population. Zeroratemeans fullremuneration ofthevalue added taxpaidbythesupplier forproducts,
works, services, material resources which were usedtofulfill above indicated deliveries.
Thislawprovides fullremuneration ofthetaxamounts. Thus, ifaccording totheresults of
theperiod under review difference between thetotalamount ofthetaxobligations arisen inconnection
withanysaleofgoods (works, services) andamount ofthetaxcredit oftheperiod under review is
negative, thansuchamount shallberemunerated tothetaxpayer from theState budget within one
month nexttothemonth under review.
5. Thecharge method wasintroduced when determining taxobligations (according tothecurrent
legislation cashmethod isapplied, i.e.turnover isdetermined when assets wereplaced tothesettlement
account ofthetaxpayer) withsimultaneous utilization ofsuchmethod fortheright ofthepayer to
receive taxcredit. Taxation ofgoods when assets arereceived cannot beconsidered asacorrect
mechanism since theState never interferes inthesettlements between enterprises (itisabusiness of
theenterprises andcontractual norm), i.e.enterprises when concluding acontract fordelivery ofgoods
negotiate thetermofsettlements andifitwasviolated enterprise islegally responsible forcoveringWT/ACC/UKR/48
Page8
losses occurred duetothedelay inpayments. Italsorefers tothepayments tothebudget. Ifanenterprise
isonlyproducing goods andshipping themandtheStateiswaiting forthetaxes tobepaidthenitwill
leadtothedepreciation ofthebudget assets andtotheimpossibility totimely provide financing for
theState needs.
6. Itisnowforthefirsttimeintheterritory ofUkraine thattaxlegislation introduced equal
responsibility ofthepayers forthetimely andproper settlements withthebudget andGovernment of
theState forthedelay inthereturn ofassets. Thatiswhyamounts which were notremunerated to
thetaxpayer within theperiod under review areconsidered budget debt, andinterests arecalculated
onthese amounts atthelevelof120percentofthediscount rateoftheNational Bank ofUkraine.
7. Astothetaxation procedure forthevalue added taxonimported products then, starting from
1July1997, when importing (sending) goods tothecustoms territory ofUkraine, value added tax
ongoods subject totheexcise dutyandgoods included intothecommodity groups 1-24ofthe
Harmonized system ofthegoods ’description andcodes, shallbeobligatory paid.
Asforother goods, value added taxpayers, attheirowndiscretion, canpayindicated taxby
issuing tothecustoms bodies promissory notesecured bythecommercial bank’sguarantee forthe
amount ofthetaxobligation. Onecopyofitshallbesenttothecustoms body, another shallbesent
bythecustoms bodytothetaxation bodybytheplace ofthetaxpayer registration, andthethirdshall
besenttothetaxpayer.
Confirmation ofthetaxnotebythecommercial bankbyitsguarantee canbeomitted onlyfor
enterprises which hadduring last12months avolume ofthetaxable operations onthesaleofgoods
(works, services) exceeding 10million UHR anddidnothaveanydebts before budget anddidnot
haveanyclaims inbankruptcy. Confirmation thattheimporter corresponds tosuchrequirements is
issued bythetaxation body according totheprocedure andterms which willbedetermined bythe
Cabinet ofMinisters ofUkraine.
Along withthis,payment ofthenoteismade byincluding taxamount onthenoteintothe
taxobligation ofthepayer.
8. When theLawcomes intoforcealltaxpayers shallfulfill aone-time calculation oftheamounts
oftaxcredit andamounts oftaxobligations according totherules ofdetermining taxbaseprovided
bythisLaw. Thisistoensure general payment procedure foralltaxpayers andtakeintoaccount
specific features indetermining taxable turnover under conditions ofthenewLaw.
Along withthis,taxpayers whoperform trade andintermediary, wholesale andretail trade
activity areobliged tofulfill entire inventory ofthegoods restsby1July1997, i.e.when thisLaw
comes intoforce. Purpose ofthisinventory istodetermine theamount ofthevalue added taxactually
paidwhen purchasing suchgoods rests. Inventory shallbedoneunder thecontrol ofthelocalbodies
oftheexecutive power. Results oftheinventory shallbereported totheState taxadministration by
theplace ofthetaxpayer registration.
According totheresults oftheone-time calculation oftheamounts oftaxcredit andtax
obligations (inaccordance withtherules ofthetaxbasedetermination, provided bythisLaw,) tax
payer mayreceive therighttoremunerate amounts ofthetaxcredit andthanresults ofthecalculation
shall betaken intoaccount when increasing taxcredits infuture periods byequal parts upto
1January 1998. Hemayadditionally transfer totheState budget anamount ofthetax,andsuchan
amount isdiscounted byincreasing taxobligations oftheappropriate periods under review byequal
parts upto1January 1998.WT/ACC/UKR/48
Page9
9. Itisnecessary tomention thatincomparison withtheDecree, Lawdoesnotprovide thenumber
ofprivileges forgoods (works, services) andsimultaneously withthisnewprivileges areintroduced
foranumber ofservices rendered inmedical andeducation institutions, employment services, archive
establishments andintheareas ofthesocial protection ofchildren, elderly people anddisabled persons
andalsopeople without inhabited places, etc.
Simultaneously, privileges forthesaleofspecial goods fordisabled persons, medicaments and
products formedical purposes, passes tothesanatorium andresort treatment, services ondelivery of
thepensions andcashsupport andalsoworks ontheconstruction ofthepremises attheexpense of
theinvestor ’sassets formilitary men, veterans andmembers ofthemilitary menfamilies which died
ontheirofficial duties.
Itshould benoted thatchanges tothetaxation procedure canbemade onlybyamending this
Lawandcannot begoverned bythenorms oftheinternational agreements except agreements ratified
bytheSupreme Rada ofUkraine before thisLawcame intoforce.
Introduction ofthecurrent Lawwillcontribute totheimprovement ofthefinancial situation
attheenterprises andwillnotimmobilize working capital ofthepayers when purchasing taxable goods,
works, services andwillalsogiveanopportunity tointroduce onbehalf ofthetaxadministration bodies
strict control overthepayment oftaxtothebudget andallocations from thebudget.
Atthesame moment, thisLawinsufficiently regulates issues ontransformation ofthepayers
toapply norms ofthisLawincomparison withexisting, namely:
- ongoods, works, services which were shipped, fulfilled, rendered before thisLawwas
introduced butnotpaidatthemoment oftheirintroduction andwhich according tothecurrent
legislation wereexempted fromtaxes. There isnoopportunity toapply existing benefits when
receiving assets (construction ofthesocial objects andpremises, research works andworks
connected withliquidation oftheChernobyl disaster results, etc.);
- allocations from thebudget insubstantial amounts require theincrease ofthetermfortheir
practical allocation.
Realcircumstances taking place inUkraine onthedistribution ofgasbetween population and
budget organizations (prices aredetermined taking intoaccount substantial amounts ofthestatesubsidies
andthefactthatimported gasforproduction purposes ofUkraine isexempted fromtaxes) werealso
nottaken intoaccount.
Issue onresponsibility ofthepayers forthetimely registration, issuance ofthetaxnote, tax
accounting anddetermination ofpersons subject toregistration (structural subdivisions, branches which
arenotindependent legalpersons) shallbealsoclarified.
Excise dutyisalsooneoftheindirect taxes. Itshallbeincluded intotheprice ofgoods and
finally paidbythebuyer butnotbytheproducer ofgoods. Excise dutyisaspecific excise i.e.itis
levied based onratesdifferentiated byseparate groups ofgoods.
Excise dutywasintroduced inUkraine in1992. Consumer goods which, asarule,arenot
essential goods andwhich profitability isquite high, aremainly subject toexcise duty. Theamount
ofincome fromexcise taxiscalculated based onexpected amounts ofgoods produced subject toexcise
tax,realassessment ofsuchincome inthisyearandtaking intoconsideration changes andamendments
tothelegislation onthismatter.WT/ACC/UKR/48
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Theplanforproceedings from excise tax1997 inthefinal state budget ofUkraine is
1069.6 million UHR, which accounts for3,5percent ofgeneral amount ofproceedings, including for
national products -893.3 million UHR, forimported products -276.3 million UHR 74.2percentand
25.8percentofoverall amount respectively.
The1.5times increase inamount ofproceedings from excise taxover1996 figures isbased
onchanges intheexcise taxlegislation ongoods (products) andonmeasures ofstateregulation of
production anddistribution ofalcohol beverages andtobacco products. Inparticular, in1996newrates
ofexcise taxwereimplemented (inECUperunit)fortobacco, andalcohol products, andmotor vehicles,
according tothese lawsofUkraine: "Onexcise taxandimport dutyontobacco products", "Onexcise
taxandimport dutyonalcohol beverages", "Onexcise taxandimport dutyonsome motor vehicles
andtyres forthem".
LawofUkraine of11July1996 "Onexcise taxandimport dutyonsome goods (products)"
amended thelistofgoods subject toexcise tax:gasoline anddiesel fuelbecame subject toexcise tax.
Proceeds fromthistaxaccording totheLawofUkraine of11July1996"Onamendments toArticle 37
oftheLawofUkraine "Onstatebudget ofUkraine for1995" aredetermined tobethesource for
establishment oftheFund ofdevelopment offuelandenergy industry which amounts to
104.7 million UHR.
Concerning distribution ofproceeds fromexcise tax-percentage ofproceeds fromexcise tax
onalcohol andtobacco products isgrowing from expected 72.8percentin1996 to79.7percentin
1997. Thisisduetoimplementation ofnewratesoftaxandalsotoexpected positive results ofmeasures
implemented bytheGovernment ofUkraine withrespect tostrengthening government control over
production anddistribution ofspirits, alcohol beverages andtobacco products.
Excise taxisdifferentiated forvarious groups ofcommodities. Nowadays, twotypes ofrates
areapplied: fixed inECU andinpercentage ofvalue ofgoods.
Procedures forcalculation andpayment ofexcise taxisregulated bythefollowing documents:
- Decree oftheCabinet ofMinisters ofUkraine of29December 1992 No.18-92 "Onexcise
tax";
- Decree oftheCabinet ofMinisters ofUkraine of30April 1993"Onchanges andamendments
totheDecrees oftheCabinet ofMinisters ofUkraine concerning taxes";
- LawofUkraine of19November 1993 "Onchanges andamendments totheDecrees ofthe
Cabinet ofMinisters ofUkraine "Onvalue added tax"and"Onexcise tax";
- LawofUkraine of19November 1993"Onchanges andamendments totheDecree oftheCMU
"Onexcise tax".
- Listofgoods(products)subjecttoexcisetaxisdeterminedbyfourlaws,adoptedbytheSupreme
Rada ofUkraine in1996, inparticular:
- LawofUkraine of6February 1996 No.30/96-BP "Onexcise taxandimport duty
ontobacco products";
- LawofUkraine of7May1996 No.178/96-BP "Onexcise taxandimport dutyon
ethylene spirits andalcohol beverages" withamendments;
- LawofUkraine of24May1996 No.216/96-BP "Onexcise taxandimport dutyon
some motor vehicles andtyres therefor";
- LawofUkraine of11July1996 No.313/96-BP "Onexcise taxandimport dutyon
some goods (products)".WT/ACC/UKR/48
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Excise taxispaidbyallbusiness entities, which produce goods (products) subject toexcise
tax,andindividuals, whoimport goods (products) subject toexcise taxintothecustoms territory of
Ukraine, andbusiness entities distributing goods subject toexcise tax,which werepurchased before
1January 1992.
Incalculation ofexcise taxasapercentage ofturnover oftrade (transfer) ofgoods (products),
theobject ofexcise taxation isturnover from distribution ofgoods (products) subject toexcise tax
produced inUkraine through, sales, exchanges forother goods (products, works, services), freeor
partially paidtransfer thereof, forpersonal utilization, industrial processing (except forturnovers from
distribution ofproduction ofgoods subject toexcise tax),andalsoforownemployees, andforimported
goods -itiscustoms (purchase) value taking intoconsideration therealamounts ofcustoms duties,
import dutyandexcise taxtotheCustoms committee.
Incalculation ofexcise taxonfixed rates inECU theobject oftaxation istheamount of
distributed (transferred, imported inUkraine) goods (products).
Excise taxongoods (products) imported inUkraine, calculated inECU, ispaidinthecurrency
ofUkraine based ontheexchange rateoftheNational Bank ofUkraine, valid onthedateoffiling
customs declaration.
Excise taxongoods (products), produced anddistributed inUkraine, calculated inECU, is
paidinthecurrency ofUkraine based ontheexchange rateoftheNational Bank ofUkraine, valid
onthefirstdayofquarter, during which thegoods (products) aredistributed andstaysunchanged during
quarter.
About 85percentofallproceeds fromexcise taxtotheStatebudget ofUkraine isfromexcise
taxonspirits, alcohol beverages andtobacco products.
In1997 astable trend ofdecrease inproduction ofspirits andalcohol beverages developed.
Ingeneral, inUkraine amounts ofproduction ofthese goods decreased bymore than40percent.
Amounts ofalcohol products distribution arestillunsatisfactory: forthefirsthalfoftheyearonly
70percentofproduced in1997 production hasbeendistributed, or50percentofproducts instock
(taking intoconsideration restoffinal products instock attheenterprises-manufacturers asof
1January 1997), with35percentofthose distributed without excise taxpaid(forexport orproduction
ofgoods subject toexcise tax).Debts ofspirit andalcohol beverages buyers iscontinuing togrow.
Forexample, foralcohol beverages, debts forthefirsthalfof1997increased by84percent,forspirits
-by79.8percent.
However, despite negative influence ofabove mentioned reasons, proceeds from excise tax
fromspirits, alcohol beverages andtobacco products stillincrease. Significant partinthisprocess is
played bystrengthened control from taxandlawenforcement agencies overbusiness entities by
requirements oflegislative andnormative actsinthisfield. Atthesame time, itisnecessary tonote,
thattaxauthorities intheiractivities inthisdirection arenotalways correctly understood byrespective
ministries andinstitutions.
During lastyeartheamounts of"falsified exports" ofgoods subject toexcise tax,inparticular
spirits andalcohol beverages, considerably increased, andalsoutilization ofsuch"export" isoneof
themostsignificant sources ofnon-marked alcohol beverages inthehome market ofUkraine. Taking
thisintoconsideration theState taxadministration ofUkraine developed andfiledforconsideration
draft resolution oftheCabinet ofministers ofUkraine which provides financial pledges by
entities-non-residents ofUkraine when receiving spirits, alcohol beverages andtobacco products
purchased withthepurpose offurther export forhardcurrency. theStatetaxadministration ofUkraineWT/ACC/UKR/48
Page12
cannot understand theposition oftheStatefoodproduction committee, theStategardening committee
andtheMinistry ofEconomy, which strongly oppose theadoption ofsuchresolution. These entities
believe thatadopting suchanorm willleadtodecrease inexports ofspirits andalcohol beverages,
nottaking intoconsideration thefact,thatsuchdecrease willtakeplace onlyonaccount ofproducts
currently leftinUkraine against requirements oflegislative acts.
What isespecially amazing, isthefactthattheStatefoodindustry committee andStategardening
andwine industry committee ofUkraine areagainst thisresolution, when theyaresupposed tobe
interested inliquidation ofconditions forappearing offalsified alcohol beverages inUkraine, because
suchproducts create unfavorable conditions forcompetition forproducts, produced byenterprises,
operating inthesystems ofthose institutions.
Inperformingtheirfunctionsoncontrolofbusinessentitiesabidingbyrequirementsoflegislative
andnormative actsinthefieldofproduction anddistribution ofspirits, alcohol beverages andtobacco
products, taxandlawenforcement agencies often faceproblems connected withimperfectness ofthe
legislation. Forsome types ofmaterial breaches inthisfield, forexample, forbreaches inprocedures
ofdistribution, transporting orstorage ofspirits andalcohol beverages, production ofspirits andalcohol
beverages without license noadministrative orcriminal responsibility forguilty persons isprovided.
Astheresult, taxandlawenforcement agencies canonlydocument breaches andhavenoefficient
tools topunish theguilty andprevent suchbreaches inthefuture.
During firsthalfof1997, theStatetaxadministration ofUkraine systematically filedproposals
onamendments toexisting legislation, which would helptocollect additional revenues forthebudget.
Inparticular, thedraftLawofUkraine wasdeveloped andagreed uponwhich terminates allprivileges
temporarily granted tonational producers ofgoods subject toexcise tax.Itwasproposed toincrease
theratesofexcise taxforsome goods (products). Atthistimethisdrafthasnotbeenpresented for
consideration bytheSupreme Rada ofUkraine.
Itisthecasethatdraftlawsarenotalways agreed intheStatetaxadministration ofUkraine.
Forexample,ontheproposalfromthepeople'sdeputiesandMinistryofIndustryofUkrainetheSupreme
RadaofUkraine adopted thelaw,which provides forexemption fromexcise taxforcartyres. However,
theseproceedsfromdistributionoftyresin1996were14.2millionUHR,andtheStatetaxadministration
ofUkraine wasonlyinformed about decrease ofincome sideofState budget.
Special features ofcalculation andpayment ofexcise tax,paidonalcohol beverages andtobacco
products produced inUkraine orimported initsterritory isdetermined bytheLawofUkraine of
15September 1995 No.329/95-BP "Onexcise taxonalcohol beverages andtobacco products".
Thefollowing persons arequalified aspayers ofexcise taxonalcohol beverages andtobacco
products:
- business entities;
- Ukrainian manufacturers ofalcohol beverages andtobacco products, andalsocontractors, which
order theproduction ofsuch products onprocessing basis; -business entities, including
enterprises withforeign investments, notdepending onthedateoftheir registration, and
individuals, involved inbusiness activities without establishing legalentity, importing alcohol
beverages andtobacco products inthecustoms territory ofUkraine forpersonal aswellas
forindustrial purposes forsaleorcommissioning orre-exporting;
- individuals, importing alcohol beverages andtobacco products intothecustoms territory of
Ukraine inamounts, subject toimport tax;WT/ACC/UKR/48
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- legalentities andindividuals, international organizations, theiraffiliates, departments andother
separate divisions, which areinvolved indistribution ofalcohol beverages andtobacco products
inthecustoms territory ofUkraine, including operations ofimporting alcohol beverages and
tobacco products inUkraine, incasetheirdistribution intheterritory ofUkraine isdoneby
theabove mentioned entities through theirpermanent representative, situated intheterritory
ofUkraine.
Theobject ofexcise taxation onalcohol beverages andtobacco products isthefollowing:
(i) turnover ofdistribution ofproduced intheterritory ofUkraine alcohol beverages andtobacco
products through theirsale,exchange andother products (goods, services andworks), free
transfer withpartial payment, partially paidoncommission andconsignation;
(ii) turnover from distribution (transfer) ofalcohol beverages andtobacco products forpersonal
consumption andindustrial processing;
(iii) value ofalcohol beverages andtobacco products, produced byUkrainian manufacturers on
thebasis ofimport forprocessing;
(iv) customs value ofalcohol beverages andtobacco products, imported intheterritory ofUkraine,
including those produced outside Ukraine on'imported forprocessing 'basis, re-imported,
andcustoms value ofproducts brought backtothecustoms territory ofUkraine fromcustoms
control zone(duty freeshops), calculated inthecurrency ofUkraine basing onexchange rate
oftheNational Bank ofUkraine, validonthedateofcustoms registration ofgoods (products),
taking intoconsideration actually paidduties.
Thefollowing amounts arenotsubject totaxation:
(i) customs value ofimported andconfiscated intheterritory ofUkraine alcohol beverages and
tobacco products, which donotclearly haveowner, andalsoforthose, inherited bythestate;
(ii) customs value ofalcohol beverages andtobacco products, transit shipped through theterritory
ofUkraine;
(iv) customs value ofimported orturnover fromdistribution (transfer) ofUkrainian rawmaterials,
imported orutilized forproduction ofgoods, subject toexcise tax;
(v) value ofalcohol beverages andtobacco products, exported outside Ukraine forforeign currency,
conditioned byreceiving thiscurrency oncurrency account ofenterprise;
(vi) customs value ofalcohol beverages andtobacco products, imported (transacted) byindividuals
intheterritory ofUkraine according tothenorms ofthelegislation ofUkraine fordutyfree
import ofthese goods;
(vii) customs value ofsamples ofalcohol beverages andtobacco products, imported intheterritory
ofUkraine fordemonstration purposes, incasetheyareowned byforeign legalentities and
theyareutilized intheterritory ofUkraine notforcommercial purposes. Samples ofalcohol
beverages andtobacco products, imported intheterritory ofUkraine andintended for
demonstration atexhibitions, contests, meetings, workshops, fairsareallowed though customs
border basing onthedecision ofcustoms authority insufficient amounts, taking into
consideration thepurpose ofimport.WT/ACC/UKR/48
Page14
Rates ofexcise taxonalcohol beverages andtobacco products areestablished inECU, they
areuniform inallUkraine andareestablished bythefollowing legislative acts:
- LawofUkraine of7May1996 No.178/96-BP "Onexcise taxandimport dutyonethylene
spirits andalcohol beverages", with amendments, made intheLaw ofUkraine of
18February 1997 No.74/97-BP;
- LawofUkraine "Onamendments totheLawofUkraine "Onexcise taxandimport dutyon
ethylene spirits andalcohol beverages" of18February 1997 No.74/97-BP;
- LawofUkraine "Onamendments totheLawofUkraine "Onexcise taxandimport dutyon
ethylene spirits andalcohol beverages" of12June1997 No.339/97-BP.
DIRECT TAXES
Income Tax
In1997 itisexpected thattheshare ofenterprise income taxinthetotalamount ofproceeds,
compared to1996, would decrease from22.3percentto12.5percent.Thisisrelated totheindexation
ofbalance value ofintangible assets andrespective increase ofdepreciation payments, which, inits
turn, would leadtoincrease ofcostofgoods (works, services) anddecreased income.
Ministry ofeconomy forecasts forthistaxwere preliminary based ontheincome of
16,707 million UHR, expected in1997. However, duetotheabove mentioned reasons itdecreased
to12,848 million UHR.
Proceeds from income taxof3,815.8 million UHR in1997 arecalculated taking into
consideration theimplementation from 01July 1997 ofthenewedition oftheLawofUkraine "On
taxation ofenterprise income tax".Share ofincome taxinGDPis3.8percentcompared 8.1percent
lastyear.
Amountofincometaxincludesproceedsfrompaymentsforpermitsinretailtrade,cashcurrency
exchange, services ingambling industry totaling 211.6 million UHR.
LawofUkraine "Onamendments totheLawofUkraine "Onenterprise income tax"wasenacted
from1July1997 andisimplemented intransactions forbudget payments starting fromincomes and
expenditures from 1July1997.
Changesandamendments,madetotheLawofUkraine"Onenterpriseincometax"haveradically
changed attitudes toward taxation ofenterprise tax.
TheLawprovides forradically newapproach todetermination thebasis oftaxation. Instead
ofincome, which iscurrently determined asadifference between revenues fromdistribution ofproducts
(works, services) andexpenditures, included intothecostofdistributed products, itisproposed to
consider income ofanenterprise, determined through decreasing theamount totalincome intheperiod
concerned byamount oftotalexpenditures oftaxpayer, adding theamount ofdepreciation payments.
TheLawprovides, firstofall,for"General provisions" (Article 1),which include definition
ofterms, usedinthisdraftlaw.TheLawdetermines taxpayers, defines procedures ofdetermination
oftaxation basis, andprovides forspecial features oftaxation forspecial typetransactions.WT/ACC/UKR/48
Page15
According toArticle 2oftheLaw, taxpayers arebusiness entities (including Statebudget and
public institutions) which gainincome frombusiness activities, non-residents, affiliates, divisions and
otherseparate branches, which havetheirseparate bankaccount and/or make separate reports forresults
oftheirbusiness activities.
TheLawprovides forspecial procedures fortaxation ofincome forthefollowing entities:
- penitentiary institutions andthereof enterprises, which utilize labor ofprisoners. Theabove
mentioned enterprises direct profits obtained fromtheactivities, anddetermined bytheMinistry
ofInternal Affairs, forfinancing ofmainactivities ofsuchinstitutions andenterprises, adding
suchprofits tofinancing schedules ofrespective budgets;
- railroad enterprises. Inparticular, income tax,obtained from main activities ofrailroad
enterprises, ispaidbyrailroad departments, andforincome, obtained from other activities
-byrailroad enterprises andtheirrespective divisions. Profits aredistributed between railroads
according totheprocedures, established bytheCabinet ofMinisters ofUkraine.
Theprocedures ofpaying consolidated taxisestablished sothatenterprises, which haveseparate
divisions without status oflegalentities, maypayconsolidated tax,taking intoconsideration amount
oftax,paidbyseparate divisions intheirplace ofbusiness. Application forpayment ofconsolidated
taxshallbefiledbefore 1Julyoftheyear, prior totheyear, from thebeginning ofwhich taxpayer
isshifting towards consolidated tax.
Incasetheamount oftax,calculated forconsolidated balance, islessthantheamount oftax
paidbyseparate divisions, suchdifference shallnotberefunded.
Thus, theabove mentioned provisions oftheLawprovide possibilities totakeintoconsideration
theaspects ofcalculating income oflocalbudgets attheplaces ofbusiness oftaxpayers.
Total income (Article 4)includes overall income fromdistribution ofgoods (works, services),
income frombanking, insurance andother transactions offinancial services nature, tradewithcurrency
funds, stocks, bonds, aswellasincome fromother sources andfromnon-trade transactions (amount
offinancial aidandcostoffreeproducts (works, services), income fromsaleofmaterial andvolatile
assets, amount ofinsurance reserves, utilized fornon-agreed purposes, amount ofpenalties and/or
fineaccording tovoluntary decision ofcontracting parties oraccording tothedecision ofStateappeal,
court, arbitration court institutions).
Forthepurposes oftaxation thefollowing areexcluded from totalincome:
- amount ofexcise tax,VAT;
- amount offunds orvalue ofproperty, received asdirect investment orre-investment incorporate
rights, including monetary andproperty investments according tothecontract onjointactivities;
- amount ofincome offederal executive authorities, localauthorities fromrendering stateservices
(issue ofpermits (licenses), certificates, registration forms, otherservices, which areobligatory
purchased according tolegislation), incasesuchincome isincluded inrespective budgets;
- dividends, obtained bytaxpayer from other taxpayers;
- funds orproperty, received asaninternational technical assistance.
Differently fromexisting procedures, according towhich production (distribution) spending,
included incostofproducts (works, services), arewritten offwithdistributed goods (works, services),
theLawprovides fortotalspending (article 5)ofproduction anddistribution asamount ofanyspending
oftaxpayer inmonetary, material ornon-material form, connected withpurchase (production) ofgoodsWT/ACC/UKR/48
Page16
(works, services) forindividual business needs, notwithstanding theperiod ofutilization ofsuchgoods
(works, services) inbusiness activities ofsuchtaxpayers.
Total spending inthisdraftLawaredetermined sothatallspending canbedivided inthree
groups:
- spending,tobeincludedintotalspending,totalincomeofanenterpriseisrespectivelydecreased;
- spending, which cannot beincluded inproduction (distribution) costs (works, services);
- spending, which havedouble purpose, thatisthose spending, which, inonecase,areaccounted
fordecrease oftaxliabilities, andinother -theabove mentioned spending arenotincluded
indecrease oftaxation basis, asthose, thatarenotdirectly related tobusiness activities ofan
enterprise.
Total gross income, corrected according totheamount ofincome, excluded fromtotalgross
income, decreased byamount oftotalspending, forms profit, which issubject totaxation.
TheLawprovides fortheformation ofadditional pension payments (pension plans) atspecially
established pension accounts fordepositors-workers, employed bytaxpayer.
Total spending oftaxpayer include amount oftotalpayments ofanemployee toadditional
pension plans, butnotmore than15percentoftotalincome, received bysuchemployee from tax
payer during taxation period, when suchpayments were made.
Amount, paidtoadditional pension planbytaxpayer onbehalf oftheemployee, isnotlevied
withpersonal income taxwhen itistransacted tosuchplan, butitissubject tosuchtaxation (adding
respective interest) when itispaidtotheemployee.
Rules oftaxaccounting, determined bytheLaw, arethatthedateofincrease oftotalincome
oftaxpayer is(whatever comes first):
- whether thedateoftransaction offunds from buyer inpayment ofgoods (works, services),
subject todistribution (onbankaccounts orregistration ofcashincashregister);
- whether thedateofdelivery ofgoods, andforworks (services) -thedateoffinalization of
document, certifying thefactofcompletion ofsuchworks (services) bytaxpayer.
Respectively, thedateofincrease oftotalspending oftaxpayer is:
- whether thedateofwriting offfunds fromtaxpayer bankaccounts forpayment ofgoods (works,
services), andincasetheyarepurchased forcash-thedaycashishanded outatthecashregistry
oftaxpayer;
- whether thedatethegoods areregistered bytaxpayer, andforworks (services) -thedate
offinlization ofdocument, certifying thefactthattaxpayer received suchgoods (works,
services).
Article 10determines uniform rateofincome taxof30percent, including forenterprises,
established onproperty ofonenatural entity.
Besides taxpayers, which payouttonatural orlegalentity itslottery, casino orother gambling
price, areobliged towithheld andpaytoState budget 30percentofsuchprice.
There isalsospecial procedure oftaxation oftransactions ofspecial type(Article 7).WT/ACC/UKR/48
Page17
(ii) Forinsurance activities (item 7.2):
Income frominsurance activities (except forlifeinsurance) arelevied ontherateof3percentoftotal
income, thatisfromamount ofreceived insurance payments, insurance payments insurance bonuses
oninsurance andre-insurance polices andintheterritory ofUkraine andabroad.
Income, obtained according tolifeinsurance andre-insurance contracts, arelevied ontherateof
10percentonaccount ofsuchpayments.
Income ofinsurers from other sources arelevied oncommon taxrate.
(ii) Taxation ofdividends (item 7.8):
TheLawprovides forpayment oftaxondividends bytaxpayer, whodistributes dividends, onthe
rateof30percentofamount ofdividends dueonaccount. Such taxispaidtothebudget before or
along withpayment ofdividends. Atthesame time, theamount oftaxduebytaxpayer isdecreased
respectively bytheamount ofpaidtaxondividends. Andfortaxpayer receiving dividends theamount
ofdividends isexcluded fortaxation purposes from itstotalincome.
Incase, when amount oftaxondividends paidismore thantaxpayer'sobligations onincome taxfor
theperiod concerned, suchdifference iscompensated bydecrease ofincome taxobligations ofsuch
taxpayer infuture taxation periods.
(iii) Taxation ofjointactivities without establishment oflegalentity (item 7.7):
Joint activities without establishment oflegal entity areconducted onthebasis ofcontract onjoint
activities, which provides forpooling offunds andproperty oftheparties withthepurpose ofreaching
common business objectives andseparate accounting ofresults ofbusiness activities. Taxation ofincome
fromtheabove mentioned activities isdoneaccording totheprocedures ,determined fortaxation of
dividends.
(iv) Special procedures areprovided fortaxation ofincome onlong-term contracts forconstruction,
production (orinstallation) ofequipment, aswellasforbond transactions.
(v) Fornon-profit organizations (item 7.11)
TheLaw provides thelistofinstitutions andorganizations, which arequalified asnon-profit
organizations:
- Stateandlocalauthorities,aswellasinstitutionsandorganizationsestablishedbythem,operating
onaccount offunds from respect budgets;
- charity funds andorganizations (including public organizations);
- pension funds;
- credit unions;
- religious organizations;
- other, whose activities donotprovide forincome.
Income oftheabove mentioned non-profit organizations, received infunds orproperty, received
freeorasnon-repayable financial assistance orvoluntary payments, passive income, aswellasfunds
andproperty, received bysuchnon-profit organizations ascompensation forreceived Stateservices,
areexempted from taxation.
Foreducation, health, archive andlibrary institutions, financed byState budget, there isa
procedure, which provides, thatincome received bythemfromanypaidservices, rendered according
toexisting legislation, isdirected torespective budgets; andincaseofinsufficient statebudget finacingWT/ACC/UKR/48
Page18
ofsuchinstitutions, suchincome isadded tospecial account andisutilized exclusively forfinancing
ofsuchinstitutions, totheextent theyarenotfinanced from State budget.
TheLawimplements newforms ofdepreciation payments andnewprocedures ofcalculation
ofdepreciation schedule (Article 8),which, inparticular, provides fordecrease oftaxation basis by
spending onpurchase, production orimprovement offixedassets through adding depreciation payments
from themoment suchspending weremade, andnotfrom thebeginning ofutilization ofsuchfixed
assets, asitisprovided inexisting procedures.
Fixed assets aredivided inthree groups:
group 1:buildings, edifices, theirstructural elements andtransmission equipment, including residential
housing andelements thereof (apartments andpublic places);
group 2:motor vehicles, furniture, electronic, optical, electric home toolsandappliances, including
electronic computing machines, andoffice equipment;
group 3:anyother fixed assets, notincluded ingroups 1and2.
Balance sheet value offixed assets ofgroup 1isregistered forevery separate building, edifice
orstructural element. Balance sheetvalue offixedassets ofgroups 2and3isregistered astotalbalance
sheetvalue ofrespective group offixedassets, notdepending onthemoment ofbeginning ofutilization
ofsuchfixed assets.
Depreciation norms aredetermined aspercentage ofbalance sheet value ofevery group of
fixed assets attheendofreported period according tothefollowing schedule (annually):
group 1: 5percent;
group 2: 25percent;
group 3: 15percent.
Taxpayer maysolely decide toimplement fastdepreciation offixed assets according to
established norms.
Taxpayers havetheright toinclude intotalspending some partofactual spending forany
kindofrepair (current andcapital) andother types ofimprovement offixed assets inamount, not
exceeding 5percentoftotalbalance sheet value ofgroups offixed assets atthebeginning ofcurrent
year. Spending, which exceed theabove mentioned amount areincluded inincrease ofbalance sheet
value offixed assets andaresubject todepreciation according toestablished procedures.
TheLaw(Article 9)provides fornewnorm, according towhich spending onextraction of
fossils arerefunded through special group offixed assets, through adding depreciation payments. The
above mentioned spending decrease totalincome oftaxpayer.
Privileges withrespect toincome tax(item 7.13, Article7), areprovided intheLaw.WT/ACC/UKR/48
Page19
Thefollowing amount isexempt from income tax:
- income, gained byenterprises from distribution ofself-produced special children nutrition
products, under condition, thatfunds freed from taxaredirected toincrease theamount of
production anddecrease retail prices forsuchproducts;
- amount, directed forinvestment ofhousing ofmilitary men.
There isstillaprivilege forincome taxforincome, gained byenterprises ofpublic organizations
ofdisabled persons from distribution ofproducts, manufactured bythem (excluding goods, subject
toexcise tax,income from agent activities, gambling business), under condition, thatthenumber of
disabled, working there isnotlessthan50percentofallemployed andwage fundforsuchdisabled
persons forthepried concerned isnotlessthan25percentofamount oftotalspending onlabor.
Besides, totalspending include:
- amount offunds andvalue ofproperty voluntarily transacted tostateorlocal budget, to
non-profit organizations, butnotmorethan4percent oftaxable income fortheperiod concerned;
- amount offunds, transacted byenterprises ofUkrainian unions ofpersons, whosuffered from
Chernobyl disaster, where thenumber ofsuchpersons isnotlessthan75percent, tosuch
unions fortheircharity purposes, butnotmore than10percentoftaxable income intheperiod
concerned.
TheLawofUkraine (Article 12)implements anewnorm, according towhich anybank or
non-banking financial institution (except forinsurance companies) havetherighttoestablish insurance
reserve torefund losses ondelinquent loans onprinciple amount (without interest andcommission)
forallcredits andother active transactions. Theamount ofsuchreserve isincluded intotalspending
oftaxpayer.
Establishment ofsuchinsurance reserve isdone byfinancial institution solely, inamount,
sufficient tocover delinquent loans.
Fortaxation purposes, theamount ofinsurance reserve islimited:
- forcommercial banks -20percentofloans due;
- fornon-banking financial institutions -theamount isestablished byrespective legislation, not
more than30ofloans due.
Themethodology fordetermining delinquency ofloansisdeveloped: forbanks -bytheNational
Bank ofUkraine, fornon-banking institutions -byrespective stateregulation authority.
TheLawofUkraine determines special features fortaxation ofnon-residents. Itisprovided,
thatnon-residents conduct business activities intheterritory ofUkraine through theirrepresentative
office.
Representative office ofnon-resident isalsoanyUkrainian legalentity, which implement agent
(representative) functions fornonresidents oftheirfounders.
Income ofnon-residents, gained intheterritory ofUkraine frombusiness activities, islevied
oncommon grounds ontherateof30percent.WT/ACC/UKR/48
Page20
Passive income ofnon-residents, gained from sources intheterritory ofUkraine, issubject
totaxation ontherateof15percentincasesuchincome ispaidortransacted onaccount ofsuch
payments. Thatis,taxonnon-resident shallbelevied notonthemoment ofrepatriation ofincome
outUkraine, butatthemoment ofpaying theincome duetonon-resident, which gives anopportunity
toavoid taxevasion from non-residents.
Differently fromexisting procedures oftaxation, income ofnon-residents, gained intheterritory
ofUkraine asdividends, frominsurance andadvertising transactions arelevied at30percentrateon
account ofsuchpayments.
Incomes fromre-insurance intheterritory ofUkraine aresupposed tobelevied on10percent
rateonaccount ofsuchpayments.
Income ofnon-residents fromfreight ininternational shipment isstilllevied on6percentrate.
TheLaw(Article 14)canceled privileges ontaxation ofincome, gained byenterprises of
agricultural industry from production anddistribution ofagricultural products. Atthesame time, it
isprovided, thatenterprises ofagricultural industry shallpayincome taxbasing onresults ofreported
taxyear.
Itisalsoprovided, thattotalincome andspending ofenterprises-manufacturers ofagricultural
products shallbeindexed based onofficial inflation rate.
Enterprises-manufacturers ofagricultural products havetherighttodecrease theamount of
income taxbyamount oftaxonland,utilized inagricultural production, andallother taxpayers include
taxonlandtototalspending.
TheLawprovides forchanges inprocedures ofcalculation andpayment ofincome tax
(Article 16).
Taxpayers solely determine amount oftaxdueandpayitnotlaterthan20thdayofmonth,
coming afterreported quarter.
Income declaration forreported quarter andcalculation ofamount oftaxduearefiledbytax
payer totaxadministration notlaterthan25thdayofmonth, coming afterreported quarter.
Filing ofaccounting report isrequired onlyforresults oftaxpayer’sannual activities, notlater
than15February oftheyear, coming afterthereported one.Incases, provided forinthelegislation,
annual accounting report shallbeapproved byresults ofaudit examination.
Enterprises-manufacturers ofagricultural products fileincome declaration, calculation oftax
dueandpaysuchtaxalong withannual accounting report.
During quarter taxpayers, excluding non-residents andmanufacturers ofagricultural products,
make advance accumulative taxpayments fromthebeginning oftheyeartoState budget forthefirst
andsecond months ofquarter, basing onincome subject totaxation taking intoconsideration thevalue
oftrade permits.
Calculation ofadvance payments forthefirstandsecond month ofthequarter shallbemade
byapayer independently andshallbeeffectuated accordingly before thetwentieth dayofthesecond
andthirdmonth ofthequarter.WT/ACC/UKR/48
Page21
Non-residents thatconduct theiractivity inUkraine through apermanent representative office,
contrary tocurrent legislation, should calculate income taxamount independently andpayaccording
totheresults ofthereporting period.
TheUkrainian Law(Article 20)shallestablish liability ofpayers fornon-observance oftax
obligations.
Tax-payers thatatthemoment ofthestatetaxadministration 'scheck-up donothaveaccounting
reports andbalance sheets, declarations anddocuments related tocalculation andpayment oftaxfor
appropriate periods shallpaypenalty intheamount oftennon-taxed minimums ofindividuals 'income
forasingle infringement.
Ifwithin nexttwelve months atax-payer makes thesecond ormore ofsuchinfringements,
suchtax-payer shallpaypenalty intheamount oftennon-taxed minimums ofindividuals 'income
multiplied onthenumber ofsuchinfringements. Thebeginning tocount theabove-mentioned twelve
months shallbethetaxperiod when lastinfringement occurred.
Tax-payers thathavenotsubmitted totheStatetaxadministration orhavesubmitted inuntimely
manner thedeclaration onincome, calculation ofincome taxandpayment order totransfer taxtothe
budget iftherearefunds ontheaccount shallpaypenalty intheamount of10percentofthecalculated
taxamount foreachcaseofinfringement.
Incaseofwell-hiding orlowering oftaxamounts, tax-payer shallpaysums totaxcalculated
bytheState taxadministration, penalty intheamount established bylegislation andfinecalculated
proceeding from 120percentoftheNational Bank ofUkraine baserateeffective atthemoment of
payment andcalculated (fine) fortotalamount inarrears (penalties arenottaking intoaccount) for
thewhole period fortheamount inarrears.
Penalty sanctions provided bythisparagraph shallnotapply totax-payers which founded the
factoftaxed income lowering prior tothestatetaxadministration 'scheck-up, notified thistothetax
administration inwritten andpaidtheamount inarrears aswellasfineproceeding from120percent
oftheNational Bank ofUkraine baserateeffective atthemoment ofpayment andcalculated (fine)
fortotalamount inarrears forthewhole period fortheamount inarrears.
Thelawhasintroduced anewnorm under which theheadofappropriate taxbody canmake
adecision onnon-application offinancial sanctions toatax-payer ifaccording toconsequences ofthe
statetaxadministration 'scheck-up cases ofarithmetical errors andincorrect notes were found that
haveledtolowering oftaxamount, butnotmore than5percentofpayer'stotalobligations amount
onpayment oftaxfortheperiod checked.
ThedraftUkrainian Law"OnMaking Changes andSupplements totheLawofUkraine "On
Patenting Some Types ofEntrepreneurial Activity" wasprepared pursuant totheCabinet ofMinisters
ofUkraine instructions No.20951/4, dated 28October 1996, andtheVerkhovna (Supreme) Rada
ofUkraine Committee onEconomic Policy andNational Economy Management, No.06-8/14-146
of18October 1996.
Introducing inUkraine theprocedure ofpatenting activity inthefieldofretail trade, foreign
currency trade aswellasproviding withservices inthefieldofplaying business thatareconducted
byagents ofeconomic activity according totheUkrainian LawNo.98/96-VR "OnPatenting Some
Types ofEntrepreneurial Activity" of23March 1996 (with changes andsupplements made bythe
Ukrainian LawNo.324/96-VR, dated 12July1997) hasgiven apossibility forthefirsttimeinfact
toattract totaxation income ofmentioned agents ofbusiness activity fromthose kinds ofactivity where
there aresignificant difficulties indetermining trueamount ofincome.WT/ACC/UKR/48
Page22
Experience inintroduction ofthisUkrainian Lawshowed thatsome ofitsnorms required
improvements. Forexample, establishing costoftradepatent forretailtradeislimited onlybymaximum
limit. Such treatment indetermining costoftrade patent leads tothesituation when bodies of
self-government approach subjectively toestablishing payment fortrade patent, establishing insome
cases conditional costoftrade patent.
ThedraftLawproposes toestablish alsothelowest limitfortradepatents inorder todecrease
thebudget 'slosses from subjective treatment inestablishing amount ofsuchpayment.
Making changes andsupplements totheUkrainian Law "OnPatenting Some Types of
Entrepreneurial Activity" provides forimprovements ofthepatenting procedure inthefieldofsmall
retail trade andpublic catering aswellasoperations onproviding withconsumer services (like
hair-dressing, dry-cleaning, etc.). Amount ofpayment fortrade patent onmentioned kinds ofactivity
isproposed toestablish atthelevelofexisting, i.e.costoftrade patent foracalendar month cannot
belessorexceed thefollowing limiting levels:
- inthecityofKyiv andoblast centers -intheamount from 80to160ECU;
- inthecityofSevastopol, citiesofoblast subordination (except oblast centers) andrayon (district)
centers -intheamount from 40to80ECU;
- inother populated areas -intheamount from 20to40ECU.
Withapproval ofmentioned changes andsupplements, responsibility ofsomeagents ofbusiness
activity totheState forcompulsory payments tothebudget shall bestrengthened andshall have
significant importance forstabilization offinancial system.
Itisproposed toextend thelistofgoods fortrade withwhich agents ofbusiness activity or
theirindependent units shallobtain trade paten freeofcharge. These areoperations onretail trade
withseeds ofvegetables, melon-plantation crops, foodrootplants andpotato (regardless thecountry
oftheirorigin).
Obtaining freetradepatent isalsoallowed byagents ofeconomic activity thatconduct operations
intradeandproductionfield(publiccatering)atenterprises,ininstitutions,organizationsandeducational
institutions iftheyareonbooks ofthementioned enterprises, institutions andorganizations.
Penalties provided forviolations ofeffective Lawshould bepaidbyaninfringer within 5days
andareeffectuated under theprocedure established bytheUkrainian Law"OnState TaxService in
Ukraine".
ThedraftLawprovides formaking editorial changes inconnection withliquidation oftheMain
State TaxInspectorate ofUkraine andestablishing theState TaxAdministration ofUkraine.
Individuals 'Income Tax
Pursuant tocurrent legislation revenues ofindividuals 'income taxare3,459.6 million UHR.
Itdepends onvolume oflabor payment fundandnumbers ofpeople involved innational economy
intheamount of20million and500thousand persons.
Regarding theroleandplace ofindividuals 'income taxinensuring theUkrainian statebudget
filling,revenuesoftheconsolidatedbudgetofUkraineforthefirsthalfof1997were1,468,241thousand-
UHR or15.2percentintotalamount oftaxes andother payments revenues tothebudget.WT/ACC/UKR/48
Page23
Decree oftheUkrainian Cabinet ofMinisters shalldetermine income tax-payers, objects of
taxation, taxrates, thelistofnon-taxed income andamounts forwhich taxed income isreduced;
peculiarities oftaxation forsome categories ofpayers aswellasshallestablish liability ofpayers.
Inparticular, Section IoftheDecree determines thatincome tax-payers areUkrainian citizens,
foreign citizens andstateless persons including thosewhohaveandwhodonothavepermanent residence
inUkraine.
Ukrainian citizens, foreign citizens andstateless persons residing inUkraine notlessthan
183daysperacalendar yearareincluded topersons withpermanent residence inUkraine.
Object oftaxation forindividuals whohavepermanent residence inUkraine isaggregate taxed
income inthecalendar yearthatincludes sources bothinUkraine andabroad.
Object oftaxation forindividuals whodonothavepermanent residence inUkraine isincome
obtained from different sources inUkraine.
Aggregatetaxedincomeshallincludeincomeobtainedintheformofmoneyandin-kind(national
orforeign currency). Income obtained in-kind shallbeincluded toaggregate taxed income according
tofree(market) prices, except income obtained from agricultural enterprises thataredetermined
according toproducts 'saleprices totheState.
Payment ofincome taxobtained inforeign currency shallbeeffectuated inUkrainian Hryvnias.
IncomeobtainedinforeigncurrencyshallbetransferredintoHryvniasundertheexchangerateestablished
bytheNational Bank ofUkraine atthedateofreceiving income.
Thesame Section contains thelistofincome types thatarenotincluded inaggregate taxed
income obtained byindividuals andforwhich aggregate taxed income shallbereduced. Thisis,in
particular, assistance onthegovernmental social insurance andgovernmental social provision (except
assistance ontemporary invalidism), compensation payments within norms provided bycurrent
legislation, amounts ofmoney provision forservicemen inconnection withfulfillment oftheirduties,
individuals 'income obtained asaresult ofsmall private farms 'plant-growing andanimal (both alive
animals andproducts ofinitial processing), etc.products saleandother types ofincome.
Aggregate taxed income shallbereduced, inparticular, fortheamount thatdoesnotexceed
theamount ofnon-taxed minimum ofindividuals 'income established bylegislation foreachcomplete
month within which income wasobtained. Non-taxed minimum isincluded tothescale oftaxation
rates. Aggregate taxed income shallbereduced additionally fortheamount thatdoesnotexceed the
amount ofnon-taxed minimum established bylegislation foreachmonth foroneofparents pereach
child under 16years ifaggregate taxed income ofthisfather (mother) doesnotexceed 10non-taxed
minimums permonth.
ThisSection oftheDecree alsoestablishes thelistofindividuals 'categories forwhom taxed
income isreduced byappropriate number ofnon-taxed income, forexample, byfifteen non-taxed
minimums forindividuals included towarparticipants andveterans under current laws, by10-for
individuals suffered fromChernobyl accident andincluded toIandIIcategories andby5non-taxed
minimums for,inparticular, invalids of1and2groups from thechildhood andindividuals suffered
from Chernobyl accident andincluded toIIIandIVcategories.WT/ACC/UKR/48
Page24
Pursuant toArticle VIofthisDecree theCabinet ofMinisters ofUkraine canprovide additional
privileges regarding income tax;andself-government authorities ofbasic level, taking intoaccount
financial conditions, shallhavetherighttoreduce aggregate taxed income ofsome individuals orto
freethem from payment oftaxinthecalendar year.
Article 7establishes taxrates.
Currently, non-taxed minimum ofindividuals 'income isintheamount of17Hryvnias.
Income taxofanindividual 'saggregate monthly taxed income intheplace ofmainjob(service,
education) shallbecalculated under thefollowing rates:
Amount ofaMonth Aggregate Taxed Income TaxRates
lessthanonenon-taxed minimum
(lessthan17UHR)Non-taxed
from 18to85UHR
(from 1to5non-taxed minimums)10percentofincome amount thatexceeds
onenon-taxed minimum
from 86to170UHR
(from 5to10non-taxed minimums)6UHR and80copiyoks plus15percentof
theamount thatexceeds 85Hryvnias
from 171to1020UHR
(from 10to60non-taxed minimums)19UHR and55copiyoks plus20percentof
theamount thatexceeds 170UHR
from 1021to1700 UHR
(from 60to100non-taxed minimums)189UHR and55copiyoks plus30percent
oftheamount thatexceeds 1020 UHR
1701 UHR andmore
(more than100non-taxed minimums)393UHRand 55copiyoks plus40percentof
theamount thatexceeds 1700 UHR
From income amounts obtained byindividuals notintheplaceofthemainjobandbyindividuals
whodonothavepermanent residence inUkraine, taxtosources ofpayment shallbecalculated under
therate20percent.
From income amounts obtained intheformofstocks 'dividends byindividuals whoarefounders
andparticipants ofenterprises, andasaresult ofsuchenterprises 'income allocation, taxtosources
ofpayment shallbecalculated from aggregate taxed income under therate20percent.
Since object oftaxation forindividuals whohavepermanent residence inUkraine isaggregate
taxed income fromdifferent sources, theDecree establishes some peculiarities totaxindividuals within
thecalendar year.
Section IIoftheDecree establishes thatincome taxintheplace ofindividuals 'mainjobshall
becollected monthly under theabove-mentioned scale ofrateswithfurther recalculation attheend
oftheyear.
Section IIIoftheDecree regulates collection oftaxintheplace other thanthemain job.
Enterprises,institutionsandorganizationsthatconductsuchpaymentswithintheyearshallcollectincome
taxunder therate20percent.
After theyearend,individuals, except those whohadincome onlyintheplace ofthemain
job,shallbeliable before 1March ofthesucceeding yeartosubmit adeclaration totaxauthorities
intheplace oftheirresidence regarding theamount ofaggregate income obtained bothintheplace
ofthemain jobandintheplace thatisother thanthemain job.WT/ACC/UKR/48
Page25
Taxauthorities shallusethisinformation tocheck declaration submitted byindividuals and
tocalculate aggregate annual taxamount.
Section IVoftheDecree establishes peculiarities ofincome taxation forentrepreneurial activity
andother types ofincome. Pursuant tothisSection, individuals 'income obtained within thecalendar
yearinthecourse ofentrepreneurial activity without creation oflegalentity shallbetaxed, aswell
asother individuals 'income notprovided bySection IIandIIIofthisDecree asobjects oftaxation.
Taxed income forsuchindividuals shallbeconsidered aggregate netincome, i.e.difference between
grossincome(proceedsintheformofmoneyandin-kind)andcostsconfirmedbydocumentsanddirectly
related toreceiving income.
Taxauthorities intheplace ofentrepreneur 'sresidence shallcalculate taxforactual annual
income. Taxpayment within theyearshallbeeffectuated through advanced payments proceeding from
estimated income orcalculated income under fixed amount ofincome tax.
Entrepreneurs andindividuals thathaveother income shallbeliable tosubmit declarations
onincome quarterly before thefifteenth dayofthesucceeding month, andaftertheyearend-final
annual before 1February ofthesucceeding year.
Section VIIoftheDecree establishes requirements regarding observance ofthisDecree. This
Section establishes obligations ofindividuals, enterprises, institutions, organizations andnatural persons
whoareagents ofbusiness activity, inparticular, accounting, submission ofinformation onincome,
etc.
Thesame Section establishes liability ofindividuals, enterprises, institutions, organizations
andnatural persons whoareagents ofbusiness activity forviolations ofthisDecree, inparticular,
foruntimely submission ofthedeclaration, forinvolving inentrepreneurial activity without state
registration, hiding income from taxation, fornon-collection andnon-transferring ofincome taxto
thebudget, etc.These measures shallbeapplied according totheUkrainian Law"OnStateTaxService
inUkraine".
Trade Tax
Taxation withtaxtrade isregulated bytheDecree No.24-93 oftheCabinet ofMinisters of
Ukraine "OnTrade Tax", dated 17March 1993, withappropriate changes andsupplements.
Trade tax-payers areUkrainian citizens, foreign citizens andstateless persons iftheyarenot
registered asagents ofbusiness activity andareinvolved innon-systematic, notmore thanfourtimes
within thecalendar year, saleofmanufactured, processed andpurchased products, things andgoods.
Object oftaxation isatotalcostofgoods under market prices thataredeclared byanindividual
inthesubmission tothestatetaxauthorities ofthedistrict (town) intheplace ofhis/her residence;
andbyindividual whodoesnothavepermanent residence inUkraine -intheplace ofsale.
Saleofproducts grown insmall private farms aswellassaleofvehicles thataretheproperty
ofindividuals andaresoldonceayearshallnotbedeclared.
Trade taxrateisestablished intheamount of10percentofgoods 'costmentioned inthe
declaration thatshould besoldwithin three days, buttotalamount ofthistaxcannot belessthanone
non-taxed individuals 'income. Iftermofsaleextends uptoseven days, taxrateshallbeduplicated.WT/ACC/UKR/48
Page26
Trade taxispaidthrough purchase ofone-time patent fortrade. Costofthispatent shallbe
established onthebasisoftotalcostofgoods mentioned byapayer andtaxrate.Taxamount forunused
patent shallnotberecovered. Minimal validity termofone-time patent isthreedaysandmaximal term
isseven days.
Trade taxisincluded tolocalbudgets intheplace ofpatents 'purchase.
Individuals whosellgoods should show one-time patents atthedemand ofStatetaxauthorities
andinternal affairs authorities officials.
Heads ofstatetaxauthorities andtheirdeputies shalllevyadministrative penalties intheamount
ofoneuptotennon-taxed individuals 'income permonth onindividuals whosellgoods without purchase
ofone-timepatentsorwithviolationsoftheirvaliditytermorsellgoodsnotmentionedinthedeclaration.
Forthesame actions made repeatedly within ayearafterlevying administrative penalty fineshallbe
intheamount oftenuptotwenty non-taxed individuals 'income permonth.
Documents onadministrative violations shallbeprepared bystatetaxauthorities officials.
Executive committees ofpeople 'sDeputies Councils shallinform population ontheprocedure
ofselling goods under one-time patents, shallestablish places andshallcreate appropriate conditions
ofsale.
Statetaxauthorities andinternal affairs authorities shallbeliable forcontrol overtheDecree 's
observance.
State Tax
TaxcollectionshallbeeffectuatedaccordingtotheDecreeoftheCabinetofMinistersofUkraine
"OntheState Tax".
Individuals andlegalentities arepayers ofthestatetaxforactions made ontheirbehalf and
giving documents thathavelegalstatus bydulyauthorized authorities.
Thestatetaxshallbelevied forthefollowing:
(i) appeal applications, applications forprior negotiations disputes, applications (complaints) in
cases ofindividual implementation andcomplaints ondecisions made withregard toreligious
organizations; awritofappeal oncourts 'decisions andcomplaints ondecisions enforced as
wellasforgiving copies bycourts;
(ii) appeal applications andcreditors 'applications incases onbankruptcy thataresubmitted to
courts ofarbitration; andapplication oncheck-up ofdecisions, enactment andresolutions for
control aswellastheirreconsideration under newly found circumstances;
(iii) effectuating notary actions bynotaries public andbyexecutive committees ofrural, small town
andtown people 'sDeputies Councils aswellasissue ofdocuments 'duplicates certified by
notary;
(iv) registration ofindividuals 'status aswellasissueofduplicates onregistration ofindividuals '
status, andissueofcertificates inconnection withchange, additions, corrections andcompletion
ofindividuals 'status;WT/ACC/UKR/48
Page27
(v) issueofdocuments withtherighttogoabroad andoninvitation ofpersons fromother countries
toUkraine, prolongation ofthese documents validity andmaking changes tothesedocuments;
registration ofnational passports offoreign citizens ordocuments thatsubstitute them; issue
orprolongation ofcertificates forresiding; issue ofentry orexitvisatoUkraine aswellas
application onentering Ukrainian citizenship;
(vi) issue oftheUkrainian passport, issue ofinternational passport orprolongation ofitsvalidity
forUkrainian citizens;
(vii) individuals 'place ofresidence registration;
(viii) issue oflicense forfishing andhunting;
(ix) operations withsecurities;
(x) operations conducted ongoods, rawmaterials andother exchanges, currency exchange;
(xi) conducting auction;
(xii) actions related toobtaining guarding documents forobjects ofindustrial property, maintaining
theirvalidity andtransferring rights oftheirowners.
Thestatetaxratesareestablished intwoways. They areasfollows:
(i) percenttothecostofappeal, agreement amount andproperty value, etc.;
(ii) non-taxed minimums ofindividuals 'income proceeding from theamount ofthementioned
non-taxed minimum effective atthemoment oftaxpayment.
TheState taxispaidprior theapplication submission orprior effectuating actions forwhich
itispaidandinappropriate cases -inthecourse ofdocuments 'issue.
TheStatetaxispaidthroughcreditorganizationsincashorthroughtransferfrompayer'saccount
toacredit organization.
Forappeal application submitted tothecourt ortothecourt ofarbitration inforeign currency
aswellasforactions andoperations inforeign currency, thestatetaxshallbepaidinforeign currency.
TheStatetaxispaidintheplace ofdocuments consideration andregistration andisincluded
tothebudget oflocalself-government, except taxpaidforappeal applications submitted tothecourt
ofarbitration andforapplication onchecking decisions, enactment andresolutions ofthecourt of
arbitration aswellasforactions related toobtaining patents forplants varieties andmaintaining their
validity. Thistaxisincluded totheState budget ofUkraine.
Pursuant totheResolution No.4048-XII, dated 25February 1994, oftheVerkhovna Rada
ofUkraine "OntheProcedure toEnforce theUkrainian Law"OnMaking Changes andSupplements
totheDecree "OntheState Tax" taxforissue oftheUkrainian passport, forissue ofinternational
passportforUkrainiancitizensorprolongationofthispassportvalidityandforre-registrationofcommon
internationalpassport,etc.in1994-1998shallbeincludedtothestatebudget,andthesefundsaredirected
attheprocess ofpassports 'exchange forpopulation.WT/ACC/UKR/48
Page28
State taxauthorities andfinancial authorities ofUkraine shallbeliable forcollection ofthe
State tax.
RealEstate Tax
Realestate taxamounts (thistaxisplanned tobeintroduced bytheUkrainian Law"OnReal
Estate Tax" thedraftofwhich wasapproved bytheVerkhovna Rada afterthefirsthearing) shallalso
beincluded tobudget ofterritorial associations intheplace ofatax-payer location.
Itwillensure gains tolocalbudget ofsignificant income amounts which willbeusedtofinance
activity oflocalself-government authorities oneffectuating power ofexecutive power bodies delegated
bytheState.
According toitseconomic sense, realestate taxisaform ofallocation andre-allocation of
national income andisusedasadditional source ofbalancing revenues andexpenses ofconsolidated
budget ofUkraine.
Ascommon practice intheworld thistaxislevied, notatresults offinancial andbusiness
activity, butobject and,accordingly, taxhasafixed character.
Costofrealestate permanently located ontheterritory oflocalself-government authorities
isplanned tobetheobjects oftaxation. Particularly, these arebuildings (inhabited andnotinhabited),
apartments,dachas,gardenhouses,garages,administrativepremisesandpremises(notinhabitedbuildings
usedforplacing fixed assets).
According tothedraftlaw,thevaluation oftaxed assets forlegalpersons shallbemade on
thebasis oftheirbook value withdueregard todepreciation. However, inthiscasedepreciation for
taxation purposes maynotbelessthan50percentoftheinitial value ofanasset. Therefore, themost
beneficial situation iscreated forthose persons whohaveacquired buildings andconstructions atlower
book value.
However, valuation ofrealestate owned byphysical persons which issubject totaxation shall
bemade onthebasisoftheaverage priceforonesquare meter oftotalspace tobedetermined bylocal
authorities.
Itisplanned thattaxation ofrealestate shallbemade attherateof1to3percentoftheannual
taxation basetobedetermined onthebasis ofaverage current value ofonesquare meter ofthetotal
areaofthebuilding, aswellasonthebasis ofbook value ofabuilding andother realestate.
Thedraftlawprovides forsocial benefits forphysical persons connected withthepayment
ofthetax,which actually exempts from thetaxabsolute majority ofpopulation owing abuilding or
anapartment. Thetaxmargin willbeequal to21square meters peronefamily member plus10additional
square meters forthefamily. According tothecalculations made byauthors ofthedraftlaw,itmeans
thatifafamily ofthree members resides inathree-room apartment, itwillnothavetopaythereal
estate tax.Forhouses located outside cities thetaxmargin willbe60square meters.
Thedraftlawprovides thattheperiodicity ofpayment ofthetaxbothbyphysical persons and
legalentities willbeonceayear.
Forlegalentities, theamount ofenterprise profit taxwillbereduced bytheamount ofreal
estate tax.Therefore, iftherealestate taxexceeds theenterprise profit tax,thelatterwillnotbeapplied.
Forenterprises withlarge fixed production assets thisprovision maybeuseful.WT/ACC/UKR/48
Page29
TaxonOwners ofVehicles
Taxonowners ofvehicles andother self-propelled machines andmechanisms willbeapplied
onthebasisoftheLawofUkraine of18February 1997"OntheTaxonOwners ofVehicles andOther
Self-propelled Machines andMechanisms". Itisexpected thatbudget revenues fromthistaxwillamount
to140million UHR.
ThisLawhasintroduced thetaxonowners ofsome landandwater vehicles, andself-propelled
machinesandmechanismsasasourceoffundingofconstruction,reconstruction,repairsandmaintenance
ofcommon usemotorways, aswellasnature protection measures onwater reservoirs.
Thetaxistransferred tolocal budgets (budgets ofvillages, settlements, towns andcities).
90percentofthese funds areusedtocover expenses ontheuseandmaintenance ofmotorways and
fornature protection measures onwater reservoirs, and10percent-forimprovement ofthematerial
andtechnical baseofauthorities which exercise registration, re-registration andtechnical examination
ofthese vehicles.
Payers ofthetaxonowners ofvehicles andother self-propelled machines andmechanisms
include enterprises, institutions andorganizations whoarelegalentities, foreign legalentities, aswell
ascitizens ofUkraine, foreign citizens andpersons without citizenship whoownvehicles registered
inUkraine incompliance withthelawinforce.
Taxation objects arevehicles falling intotherespective codeoftheHarmonized Commodity
Description andCoding System, and,inparticular, wheel tractors, vehicles fornolessthan10persons
includingdriver,personalcars,trucks,specialvehiclesbesidesthoseusedfortransportationofpassengers
andcargoes, motorcycles (including motorcycles) andengine-powered bicycles besides those withthe
volume oftheengine lessthan50cm3,yachts andsailers withauxiliary engine orwithout such(besides
thoseusedforsporting purposes), motor boatsandcutters besides boats withsuspended engines (besides
those usedforsporting purposes), other boats (besides those usedforsporting purposes).
Thefollowing willnotbeobjects oftaxation: caterpillar tractors, motorcycles (including
motorcycles) andengine-powered bicycles withthevolume oftheengine nomore than50cm3,special
vehicles forambulance andfiretrucks, vehicles usedonfactories, warehouses, inports andairports
fortransportation ofcargoes within short distances, machines andmechanisms foragricultural works,
machines andmechanisms forgathering andthrashing ofagricultural crops, machines forcleaning,
sorting andrejection ofeggs, fruitandother agricultural products, yachts, sailers andboats usedfor
sporting purposes.
Taxratesprovidefortaxationofvehiclesdependingonenginevolume,enginepowerinkilowatts,
or1cmofthelength ofthebody instead ofapplying taxonthepower measured inhorse powers.
Taxonowners ofvehicles andotherself-propelled machines andmechanisms shallbecalculated
bylegalentities onthebasisofofficial accounting reports specifying thenumber ofvehicles andother
automotive machines andmechanisms asof1January ofarespective year. Calculation ofthetaxon
owners oflandvehicles shallbemade onthebasis oftheengine volume orengine power, andthe
make ofvehicles. Taxonowners ofwater vehicles shallbemade onthebasisofthelength ofthebody
ofthevehicle atratessetforthbytheLaw. ThetaxshallbepaidintheUkrainian currency andcalculated
attheexchange rateoftheNational Bank ofUkraine forthefirstdayofaquarter during which the
taxispaid.
According totheprocedure andwithin timesetforth bytaxauthorities, legalentities submit
totheirlocalStatetaxadministrations (nolaterthan15March oftheyearfollowing thereported year),WT/ACC/UKR/48
Page30
calculations oftheamount oftaxintheform approved bytheState TaxAdministration ofUkraine
made onthebasis oftheaccounting report (balance sheet).
Taxonowners ofvehicles andother self-propelled machines andmechanisms shallbepaid
prior toregistration, re-registration ortechnical examination ofvehicles. Taxispaidfortheperiod
tillthenexttechnical examination.
Thefollowing entities shallbeexempt from thetax:
(i) public transportation enterprises -forvehicles usedfortransportation ofpassengers, when fare,
fixed bythelaw,iscollected inthese vehicles;
(ii) institutions andorganizations funded from theState Budget ofUkraine, namely: institutions
andorganizations oftheMinistry ofDefense, National Guard, Frontier Forces, CivilDefense,
Security Service, Ministry ofHome Affairs, Public Prosecutor ’sOffice provided thatthese
vehicles areusedforofficial purposes andtheirnumber iswithin thelimits fixed byrelevant
acts;
(iii) persons specified inparagraphs 1and2,Article 14oftheLawofUkraine "OntheStatus and
Social Protection ofCitizens WhoSuffered from theChernobyl Accident", Articles 4-11of
theLawofUkraine "OntheStatus ofVeterans ofWar, andGuarantees ofTheir Social
Protection", Article 8oftheLawofUkraine "OntheBasic Principles ofSocial Protection
ofVeterans ofLabor andOther Elderly People inUkraine", foronecarwithengine volume
nomore than2,200 cm3(GAZ-24 -2,500 cm3),aswellashandicapped ofthe1standthe2nd
groups -foronehand-driven car;
(iv) persons specified inparagraphs 3and4,Article 14oftheLawofUkraine "OntheStatus and
Social Protection ofCitizens WhoSuffered fromtheChernobyl Accident" -foronecarwith
engine volume nomore than2,200 cm3(GAZ-24 -2,500 cm3)before theirresettlement, and
during three years afterresettlement fromthezoneofguaranteed voluntary resettlement, and
thezoneofenforced radioecological control:
(v) by50percent-agricultural enterprises which produce goods -forwheel tractors, buses and
special vehicles fortransportation ofpeople withnolessthan10seats.
Local Taxes andFees
TheDecree oftheCabinet ofMinisters ofUkraine of20May1993"OnLocal Taxes andFees"
determines thetypes oflocaltaxes andfees,theirmargins, taxation objects andsources ofpayment.
Peculiarity ofthisDecree isthatitprovides fortheintroduction oflocaltaxes andfeesbyadecision
ofthelocalauthority. Foreachtaxorfeetobepaid, localauthorities draftandapprove resolutions
prescribing theprocedure ofpayment andtransfer oftaxes andfeestolocalbudgets, incompliance
withthelistandmargins setforth bytheaforesaid Decree.
Local authorities, within theirjurisdiction, mayintroduce preferential taxrates, cancel alllocal
taxes andfees,orexempt certain categories oftax-payers from payment thereof, aswellasallow to
postpone payment oflocaltaxes andfees.
Hotel Fee: Payers ofthisfeeinclude persons living inhotels. Themaximum amount ofthe
feemust notexceed 20percentofthecostofliving inthehotel (without additional services). The
hotel feeiscollected andtransferred tothelocalbudget byhotel management.WT/ACC/UKR/48
Page31
Parking Fee: Payers ofthisfeeinclude legalentities andphysical persons whoparkvehicles
inplaces specially equipped orallocated forparking. Therateofthisfeeisfixedfor1hourofparking.
Itsmaximum mustnotexceed 3percentoftheminimum non-taxed income inspecially equipped places,
and1percent-places allocated forparking. Parking feeispaidbydrivers attheplace ofparking.
Market Fee: Themarket feeisthefeecharged forsalesplaces inmarkets. Itispaidbylegal
entities andphysical persons whosellagricultural andindustrial products, andother goods. Market
feeiscollected perday.Itsmaximum mustnotexceed 20percentoftheminimum non-taxed income
forphysical persons, andthreeminimum non-taxed incomes forlegalentities. Market feeiscollected
bythestaffofthemarket before sales.
FeeforIssuance ofAuthorization toOccupy Apartment: Thisfeeispaidforservices connected
withissuance ofadocument authorizing tooccupy anapartment. Themaximum ofthefeemustnot
exceed 30percentofminimum non-taxed income. Thefeeispaidthrough banking institutions prior
toissuance oftheauthorization.
Resort Fee:Payers ofthisfeeinclude citizens whocome torecreation areas (resorts). Its
maximum maynotexceed 10percentofminimum non-taxed income. Theresort feeiscollected: by
hotel management andother lodging establishments during thecheck-in ofguests; byorganizations
dealing inrentofapartments -when guests aresenttohouses orapartments owned byindividuals.
Persons whoindependently stayinhouses orapartments owned byindividuals paythefeeaccording
totheprocedure setforth byCouncils ofPeople ’sDeputies which establish thisfee.
FeeforParticipation inHorse Races: Thisfeeischarged onlegalentities andphysical persons
whobring theirhorses forcommercial competitions. Themaximum ofthefeeforparticipation inhorse
races, foreachhorse, must notexceed three minimum non-taxed incomes. Thefeeiscollected by
hippodrome management before races.
FeeforPrize atHorse Races: Thisfeeiscollected byhippodrome management frompersons
whowoninthehippodrome totalizator, atthetimeofpayment ofsuchprize. Themaximum ofthe
feemust notexceed 6percentoftheamount ofprize.
FeeforParticipation inHippodrome Totalizator: Thisfeeiscollected intheformofafixed
percentage ofthepayment charged forparticipation intotalizator. Itsmaximum must notexceed
5percentofsuchpayment. Thisfeeiscollected byhippodrome management during thesalesoftickets
forparticipation intotalizator.
AdvertisingTax:Objectoftaxationisthecostservicesconnectedwithinstallationandplacement
ofadvertising. Thetaxisapplied toalltypes ofadvertising andmessages witharepresented for
commercial purposes through massmedia, displayed onposters, display boards, other equipment, on
streets, motorways, playgrounds, houses, vehicles andother places. Themaximum ofthetaxmust
notexceed 0.1percentofthecostofservices forsingle advertising, and0.5percent-forplacement
ofmultiple advertising. Thetaxispaidduring thepayment forservices connected withinstallation
andplacement ofadvertising.
FeefortheRight toUseLocal Symbols: Thisfeeischarged onlegalentities andphysical
persons whousethese symbols forcommercial purposes. Permits touselocalsymbols (coatofarms
ofacity,name orpicture ofarchitectural orhistorical monuments) isissued byrelevant divisions of
localauthorities. Themaximum ofthefeeforlegalentities mustnotexceed 0.1percentofthevalue
ofproducts manufactured orservices rendered withtheuseoflocal symbols, andforindividuals
exercising business activities -fiveminimum non-taxed incomes.WT/ACC/UKR/48
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FeefortheRight toCinema andTelevision Shooting: Thisfeeispaidbycinema andtelevision
enterprises which make shootings thatrequire special measures tobetaken bylocal authorities
(commissioningofpoliceunits,encirclementoftheareawereshootingisperformed,etc.).Themaximum
ofthefeemust notexceed actual expenses onsuchmeasures.
FeefortheRight toOrganize Local Auctions andLotteries: Payers ofthisfeeinclude legal
entities andphysical persons whohavethepermit toorganize auctions andlotteries. Object oftaxation
isthestarting value ofitems brought forlocalauctions, orthetotalsumoflottery. Thefeeiscollected
threedayspriortotheauction, oratthemoment ofissuance ofpermit toorganize alottery. Itsmaximum
mustnotexceed 0.1percentofthevalue ofitems brought forauction, orofthetotalsumofalottery.
Communal Tax: Communal taxischarged onlegalentities, except fororganizations funded
from theState budget, organizations funded bydonations andagricultural enterprises. Itsmaximum
mustnotexceed 10percentoftheyearly wage fundcalculated onthebasis ofminimum non-taxed
income.
FeeforPassing ofVehicles Going Abroad through Territories ofBorderland Regions: This
feeischarged onlegalentities andcitizens ofUkraine inamount of0.5percentofnon-taxed minimum
income regardless ofthemake andpower ofavehicle, andonlegal entities andcitizens ofother
countries, including former USSR republics -inamount ofUS$5-50.
Thefeeisnotapplied:
- tovehicles carrying abroad cargoes under stateorders andState contracts;
- toUkrainian citizens going onbusiness-trips;
- sportsmen going tointernational competitions;
- citizens traveling oncultural exchange programs, andformedical treatment orrehabilitation.
FeeforIssuance ofPermits forPlacement ofTrade Outlets: Thisisapayment forissuance
ofpermits fortradeinspecially allocated places. Thefeeiscollected byauthorized organizations from
legalentities andphysical persons whosellagricultural andindustrial products, andother goods. The
maximum ofthefeemustnotexceed 20minimum non-taxed incomes forpersons permanently trading
inspecially allocated places, oroneminimum non-taxed income perday.
Incompliance withthelawinforce, responsibility forcorrect calculation andtimely payment
oflocaltaxes andfeestolocalbudgets isontax-payers.
Payment forUseofResources
Payment forSpecial UseofWater Resources
Theprocedure forcollection offeesforspecial useofwater resources isapproved inthe
Resolution oftheCabinet ofMinisters ofUkraine of8February 1994, No.75 "OntheApproval of
theProcedure forCollection ofPayment forSpecial UseofFresh Water Resources, andProvisional
Rates forSpecial UseThereof", asamended.
Ithasbeenforecast bytheStateCommittee forWater Management thattotalbudget revenues
fromthispayment in1997willbe341million UHR. Itis4.7times more thancurrent revenues, while
bytheResolution oftheCabinet ofMinisters ofUkraine of8February 1997, No.164 payment rates
wereincreased onlyby2.5times forsurface waters, andby2times forunderground waters. Besides,
thecalculation ofexpected figures wasmade proceeding fromthepresumption thatwater consumption
(and, consequently, payment fortheconsumption) willgrow, despite thatinreality there isdecline
ofproduction which results inthereduction ofwater consumption.WT/ACC/UKR/48
Page33
Even ifwetakeintoaccount themaximum increase inratesby2.5times, budget revenues
willamount to190.8 million UHR.
Payment forspecial useofwater resources istransferred byallbusiness entities besides those
using water exclusively forsatisfaction ofowndrinking andsanitary needs, andbyhydropower and
water transport enterprises which useriver ways.
Amount ofpayments forspecial useofwater resources, except inthecaseofhydropower
enterprises andwater transport, iscalculated according toratesofpayment (approved bytheResolution
oftheCabinet ofMinisters ofUkraine), water consumption, andconsumption limits.
Fortheperiod till1999thefollowing coefficients willapply totheratesofpayment forspecial
useofwater resources:
- forpond andlakefarms (breeding offishforsale)-0.1;
- foragricultural producers including thoseusing irrigation andmelioration systems (forgrowing
ofagricultural products andirrigation ofland) -0.2;
- forthermal andnuclear power plants (generation ofheatandelectricity) -0.5;
- forhousing andcommunal enterprises, including those owned byorganizations -0.1.
Forusage ofwater resources above limits, thepayment isincreased five-fold.
Theabove payments arerecorded asproduction expenses iftheconsumption waswithin limits,
andpayment forconsumption above thelimitwillbededucted from theprofit aftertax.
80percentofpayment forspecial useofwater resources ofnational importance istransferred
totheState Budget, and20percent-tothebudget oftheRepublic ofCrimea, orrespective local
budgets.
Payment forspecial useofwater resources oflocal importance isfullytransferred tolocal
budgets.
Payment forSpecial UseofForestry Resources
Payment forspecial useofforestry resources hasbeenintroduced bytheForestry Code of
Ukraine approved bytheResolution oftheSupreme RadaofUkraine of21January 1994, No.4853-XII.
Calculations ofpayment ofspecial useofforestry resources arebased ontheproposal ofthe
Ministry ofForestry toreduce thevolume oftimber-cutting. Such reduction isreasoned bythefact
thatsitesallocated fortimber-cutting arenotusedcompletely. Taking intoaccount thatpayment for
special useofwater resources in1997 wasincreased by2times, thetotalrevenues willamount to
39.4millionUHR, which equals 0.1percentoftotalbudget revenues.
Payers ofthispayment areallforestry users which exercise special useofforestry resources.
Theobject ofcollection ofsuchpayment istimber (which issoldlive,insoil), softresin,
secondary timber materials (stumps, bast,crust, leaves etc.), secondary usage offorests.
Rates fortimber (which issoldlive,insoil), andforsoftresinareapproved bytheResolution
oftheCabinet ofMinisters ofUkraine, andratesofpayment forsecondary timber materials areset
forthbytheCouncil ofMinisters oftheAutonomous Republic oftheCrimea, aswellasoblast, Kyiv
andSevastopol State Administrations.WT/ACC/UKR/48
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80percentofpayment forspecial useofforestry resources ofnational importance istransferred
totheState Budget, and20percenttorespective localbudgets.
Payment forspecial useofforestry resources oflocalimportance isfullytransferred tolocal
budgets.
Payment forSpecial UseofEntrails forExtraction ofMinerals
Payment forspecial useofentrails forextraction ofminerals hasbeen introduced bythe
Resolution oftheCabinet ofMinisters ofUkraine of8February 1994, No.85"OntheApproval of
Provisional Procedure ofCollection ofPayment forSpecial UseofEntrails forExtraction ofMinerals".
Thepayment ischarged forspecial useofentrails forextraction ofminerals ofnational and
localimportance.
Division ofminerals intothose ofnational andlocalimportance isdetermined bytheResolution
oftheCabinet ofMinisters ofUkraine of12December 1994, No.827"OntheApproval ofListsof
Minerals ofNational andLocal Importance".
Payers ofthispayment include allentrails-users, regardless oftheformofownership, including
enterprises withforeign investment, which exercise extraction ofminerals.
Land owners andlandusers, whoexercise extraction ofminerals oflocalimportance forown
needs, andwithin limits oflandtransferred intotheirownership oruse,areexempt frompayment for
special useofentrails forextraction ofminerals.
Theobject ofcollection ofthispayment isthevolume ofextracted minerals (oil,condensate,
gas,peatandhydromineral resources).
40percentofpaymentforspecialuseofentrailsforextractionofmineralsofnationalimportance
aretransferred totheState Budget, and60percenttorespective localbudgets.
Payment ofspecial useofentrails forextraction ofminerals oflocal importance isfully
transferred tothelocalbudget.
Allocations fortheGeological Survey Performed attheExpense oftheState Budget
Allocations forthegeological survey performed attheexpense oftheStatebudget introduced
bytheResolution oftheCabinet ofMinisters ofUkraine of11August 1995No.645"OnConfirming
Procedure ofestablishing normative allocations forgeological surveys performed attheexpense of
theStatebudget andtheirpayment" onthebaseoftheCode ofUkraine onresources of27July1994.
Payers oftheallocations forthegeological surveys performed attheexpense oftheStatebudget
areusersoftheresources ofalltypes ofownership including enterprises withforeign investments which
areextracting minerals (including underground fresh andmineral waters) atthefields discovered at
theexpense oftheState budget assets.
Owners andusers oflandwhich mine localminerals according totheestablished procedure
forownpurposes orutilize minerals foreconomic anddomestic needs attheplots granted tothem
areexempted from paying allocations forgeological surveys.WT/ACC/UKR/48
Page35
Theamount oftheallocations forthegeological surveys isthecostofextracted mineral raw
materials orproducts ofitsprocessing. When extracting underground freshandmineral waters volume
oftheirextraction isasubject forcalculation oftheallocations forgeological surveys.
Substantial amount ofallocations shallbepaiddirectly totheState budget.
Payments oftheOilandGasComplex
These payments include bothrentandpayment foroilandnatural gasextracted inUkraine.
Spread ofprices fornatural gas,allocations forthetransit ofthenatural gasbythepipelinesthrough
theterritory ofUkraine intotalwereplanned inthebudget for1997inamount of1561.1 million UHR
including:
- rentpayment -337.1 million UHR
- spread inprices -594.0 million UHR
- allocations forthetransit -630.0 million UHR
RentPayment fortheOilandNatural GasExtracted inUkraine
Rentpayment fortheoilandnatural gasextracted inUkraine wasintroduced bytheOrder
ofthePresident ofUkraine of21December 1994No."OnIntroducing RentPayment forOilandGas
extracted inUkraine".
Payers oftherentpayment areoilandgasextracting enterprises.
Rates oftherentpayment aredetermined bytheorders oftheMinistry ofEconomics ofUkraine
onthebaseoftheOrder ofthePresident ofUkraine.
According totheLawofUkraine "OnState budget ofUkraine for1997" starting from the
1July1997 oilandgasextracting enterprises (except government-owned production enterprise
"Chornomornaftogas") shallpaytotheStatebudget rentpayment fornatural gasinamount equal to
US$9.59 per1000 cubic miters (or70percentofthedetermined rentpayment ratefornatural gas).
Spread inPrices forNatural Gas
Payment totheState budget ofthespread ofprices fornatural gasextracted attheterritory
ofUkraine isdetermined bytheLawofUkraine "OnState budget for1996-1997".
Payers ofthespread inprices fornatural gasextracted intheterritory ofUkraine aregas
extracting enterprises ofthejointstock venture "Ukrgasprom" andoilandgasextracting enterprises
ofthejointstockventure "Ukrnafta" andalsootheroilandgasextracting enterprises forwhich wholesale
prices forthenatural gasextracted intheterritory ofUkraine aredetermined bytheMinistry of
Economics.
SpreadofpricesfornaturalgasisthedifferencebetweenconfirmedbytheMinistryofEconomics
marginal wholesale andsaleprice fornatural gasforUkrainian consumers (nottaking intoaccount
expenses oftheshipping enterprises andtransport expenses oftheextracting enterprises) andthecost
ofextraction, taking intoaccount value added tax.WT/ACC/UKR/48
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Allocations fortheTransit ofNatural GasThrough theTerritory ofUkraine
Allocations forthetransit ofnatural gasinpipelinesthrough theterritory ofUkraine are
determined bytheLaws ofUkraine "OnState Budget for1996-1997".
According totheindicated Laws these allocations shallbepaidbytheJoint Stock Venture
"Ukrgaprom" which transfers tothestatebudget indicated allocations proceeding from thevolume
ofthetransited gasinamount equivalent toUS$0.37 (starting from the1July1997 -US$0.20) per
1000 cubic meters ofnatural gasperevery 100kilometers.
Allocations fromtheAssets Received fromPrivatization oftheProperty oftheState-owned Enterprises
Allocation tothebudget oftheassets received from privatization oftheproperty ofthestate
owned enterprises isdetermined bytheLaws ofUkraine "OnStateBudget ofUkraine for1993-1997".
Privatization bodies shallpaythese indicated amounts.
Payment forLand
From the1January 1997theLawofUkraine "OnMaking Amendments totheLawofUkraine
"OnPaymentforLand"of19September1996No.378/96-BPwasintroduced.Accordingtotheindicated
Lawutilization oflandisnotfreeofcharge inUkraine. Payment forlandismade intheform oftax
forlandorrentpayment which isdetermined depending uponthequality andlocation ofthelandplot
proceeding from thecadastre evaluation ofland.
Payment forlandisdetermined according totheLawofUkraine "OnPayment forLand" and
indexation oftheratesofpayment forlandin1997proportionally totheindex ofincrease ofwholesale
prices in1.81times, duetothisamount, payment forlandcomes to934.5 millionUHR.
Inthissumshare ofthepayment fortheagricultural landwillamount to192million UHR
or20.5percentofthetotalamount, population willpay15million UHR or1.6percent. Payment
forthelandinvolved innational economy willamount to713million UHR or76.3percent.
Owners ofthelandandpersons which areusing itshallpaylandtax.
Rented landplots given shallbecharged withrentpayment.
Paymentforlandisintroducedforthepurposeofestablishingsourceofassetstofinancemeasures
onrational utilization andprotection ofthelands, increase oftheirfertility, compensation ofexpenses
oftheowners oflandandpeople whoarerenting itandcarrying outeconomic activity attheland
oftheworse quality andkeeping landcadastres.
According totheirpurposes alllands ofUkraine canbeclassified as:
(i) lands foragricultural purposes;
(ii) lands ofthepopulated areas (cities, villages ofthecitytypeandsmall villages);
(iii) industrial, transport, connection, defense lands andlands forother purposes;
(iv) lands oftheforestry fund;
(v) lands ofthewater fund;
(vi) reserve lands.WT/ACC/UKR/48
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According tothisclassification theLawofUkraine "OnPayment forLand" determines average
ratesofthelandtaxwhich canbeverified while changing cadastre evaluation oflands.
Object ofthepayment forlandisalandplotwhich isbeing owned, utilized including rent
terms andconditions.
Owner ofthelandandtheperson whoisusing itorleasing shallpayforit.
Amount ofthelandtaxdoesnotdepend upon theresults ofeconomic activity oftheplot’s
owners orpeople whoareusing landandshallbeestablished intheform ofpayments peroneunit
oflandsquare calculated atoneyear.
Indicated Lawprovides anumber ofpreferences onpaying landtax.
Besides, Supreme Rada oftheRepublic ofCrimea, regional, KiyvandSevastipil localRadas
canalsoprovide privileges onthepayment forland: partial exemption foracertain period oftime,
reduction oftherateofthelandtaxonlyattheexpense ofassets which aretransferred tothespecial
budget accounts oftheappropriate budgets.
Legal persons shallindependently calculate theamount ofthelandtaxaccording totheform,
determined bytheStatetaxadministration ofUkraine andannually notlaterthanthe1February shall
submit datatotheappropriate statetaxadministration.
Calculation ofthelandtaxtothecitizens shallbedinebytheStatetaxadministrations which
issue tothepayer before 15Julyofthecurrent yearpayment instruction topaythetax.
Payments forthelandshallbetransferred tospecial budget accounts ofrural, small townand
town councils ontheterritory ofwhich plots ofthelandarelocated.
Forcentralized fulfillment ofworks provided bytheLaw, 30percentoffunds paidforthe
landandreceived onspecial budget accounts ofbasic level councils shallbecentralized onspecial
budget account oftheState Committee ofUkraine onLand Resources and10percent-onspecial
budget accounts oftheCrimean Autonomous Republic andoblasts.
Funds paidforthelandshallbeusedtofinance measures onrational useandprotection of
lands, maintaining theland-survey, conducting landreform, economic stimulation oftheland'sowners
andother measures.
Currency Control
Thissection oncurrency control provides information ontheextent offoreign business activity
andthedegree ofcurrency violation apprehended bythecurrency control department.
AccordingtodataofcurrencycontroldepartmentsofthestatetaxadministrationsintheCrimean
Autonomous Republic, oblasts, cities ofKyiv andSevastopol, 1,464,816 agents ofbusiness activity
including 603,710 legal entities and861,106 individuals were registered asof1January 1997.
55,739 legalentities and729individuals areinvolved inforeign economic activity, i.e.56,468 agents
ofbusiness activity.WT/ACC/UKR/48
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Oneofthemaindirectionsofactivityforcurrencycontroldepartmentsiscontroloverobservance
ofpayment terms onforeign economic operations byagents ofbusiness activity. Incomparison with
1995thenumber ofcontrolled agents ofeconomic activity hasincreased morethantwice (17,363 agents
werecontrolled in1995). Itisrelated toenforcement ofnewlegalacts(inparticular, regarding regulation
ofbarter (goods exchange) operations andoperations withgive-and-take rawmaterials inthefieldof
foreign economic relations). These actsprovide forliability ofagents andgivetherighttotaxauthorities
toapply financial sanctions against aviolator. They alsoprovide forintroduction ofanewscheme
ofcurrency control beginning 1January 1996 which stipulates compulsory exchange ofinformation
regarding payments onforeign economic operations between theNational Bank ofUkraine, theState
Customs Committee ofUkraine, theState TaxAdministration ofUkraine, theMinistry ofForeign
Economic Relations andTrade ofUkraine andtheMinistry ofStatistics ofUkraine according tothe
Resolution No.1044 oftheCabinet ofMinisters ofUkraine andtheNational Bank ofUkraine "On
Measures Regarding Ensuring Currency Control" dated 26December 1995. Analysis shows thatthe
numberofcontrolledagentshasbeenincreasedsignificantly,particularly,inDnipropetrovsk,Zhytomyr,
Kharkiv andKherson oblasts -byfourtimes, intheCrimean Autonomous Republic, Lviv, Mykolaiv,
Poltava andSumy oblasts -bythree times andinZhaporizhiya, Ivano-Frankivsk, Kyiv, Cherkassy
andChernigiv oblasts -twice.
11,437agentsofbusinessactivitymadeviolations,i.e.eachthirdofcontrolledones.Thenumber
ofagents ofbusiness activity made violations interms ofpayments onforeign economic operations
inthecontext ofoblasts in1995 and1996.
Analysis offound violations shows thatthelargest specific weight, i.e.52percentoftotal
violations isuntimely return ofcurrency proceeds andgoods from abroad while effectuating import
andexport operations. Such violations were found in7,928 cases.
6,822 cases ofuntimely receipt ofgoods under barter agreement werefound inthecourse of
control. Thisis45percentoftotalnumber offound violations.
Control alsoshows unsatisfactory status ofpayments while conducting operations with
give-and-take rawmaterials inforeign economic relations. Violations oftheUkrainian Law"On
OperationswithGive-and-TakeRawMaterialsinForeignEconomicRelations"werefoundin425cases.
Themain means toinfluence violators ofpayments 'terms onforeign economic operations
established bylawsareapplication offinancial sanctions tothem intheform offine.In1996 tax
authorities calculated fineintheamount of208,5 million UHR (83,9 million UHR in1995).
In1996 theState TaxAdministration ofUkraine made petitions toapply special sanctions
according toArticle 37oftheUkrainian Law"OnForeign Economic Activity" to2,984 violating
enterprises. TheMinistry ofForeign Economic Relations andTrade ofUkraine applied special sanctions
to4,387 enterprises within 1995, 1996andthefirstquarter of1997. Thanks tothat,Ukraine hasreceived
currency valued intheamount ofUS$114 million.
Moreover,inordertoapplyappropriatemeasures,taxadministrationsin1996submittedmaterials
tolaw-enforcement agencies andoffices ofpublic prosecutors on3,611 enterprises which within long
period oftimedidnotreturn currency values orgoods from abroad andwere under investigation.
Controlling entrepreneurial entities ’compliance withtherequirements setforthbyResolution
ofPresident "OnUrgent Measures Aimed toReturn toUkraine theHard Currency Assets Unlawfully
KeptAbroad" No.319/94 of18June1994, constitutes another important activity oflocalcurrency
control departments.WT/ACC/UKR/48
Page39
Itshould bepointed outthatentrepreneurial entities declare theircurrency assets onthequarterly
basis. Thus, overthefourth quarter of1996, 375,186 business entities fileddeclarations ontheirhard
currency assets, incomes andproperty keptoutside ofUkraine. Thisnumber accounts for80percent
ofallbusinesses thatarerequired tofilehardcurrency declarations.
14,972 enterprises havereported holding hardcurrency assets, incomes orproperty abroad.
Incomparison withthefourth quarter of1995, thenumber ofsuchenterprises haverisen more than
twice. This increase canbeattributed tothefactthatsimultaneously with theintroduction on
1January 1996 ofthenewform ofcurrency declaration itwasestablished thatbusiness entities that
failtorespect effective declaration procedures, timely submit information ontheirhardcurrency assets,
conceal ordistort suchinformation, shallbeheldresponsible andnecessary sanctions shallbeapplied
todelinquent entities.
Analyses ofdeclared currency assets, incomes andproperty heldabroad showed thatthelargest
partofsuch(78percent) isconstituted byproperty andgoods.
Presently, thevalue ofassets heldoutside Ukraine intheformofproperty, goods, andincluding
accounts payable under foreign trade transactions, amounts to7.5billion UHR, thelarger part
(80percent) ofwhich consists ofproperty andgoods contributed toauthorized capitals offoreign
companiesoperatinginothercountries.Limitedliabilitycompanies,stockcompaniesandsmallbusinesses
account forthelarger partofentities holding theirproperty andgoods outside Ukraine.
Financial investment ofUkrainian enterprises amount to2.1million UHR. Thebreakdown
ofthisinvestment shows that33percentofthismoney waspaidforforeign companies 'valuable papers,
while 29percentwaspaidforimport goods thathavenotbeenactually imported within thespecified
bylawperiod oftime. Thelargest investments abroad wereposted byStateenterprises andenterprises
withforeign investments (42and24percent, respectively), aswellasbybusiness entities ofother
forms ofownership.
Thetotalsumofdeclared currency assets, incomes andproperty, maybepresented asconsisting
oflong-terminvestmentsandcurrenttransactions.Itisnoteworthythattheshareoflong-terminvestments
isontherise,which isapositive development withrespect tolegalizing currency assets unlawfully
transferred andheldabroad.
Thelarger partofsuchinvestments (75percent) consists ofassets contributed tostatutory
funds offoreign enterprises operating abroad.
Analyses ofthestructure ofcurrent transactions shows thatthelargest share ofsuchconsists
ofexports andimports (27and39percent,respectively) withoverdue payments forthem. Theshare
ofimportedgoodsthatarenotprovidedwithinthelegallyestablishedtermundertradebartertransactions
accounted for19percent.
Over 1996 thetaxadministrations examined declarations onhardcurrency assets, incomes
andproperty of212,576 entrepreneurial entities. Thenumber ofentities whose declarations were
examined fellby27percentcompared tothatin1995, which isduetothefactthatwhile in1995
suchexaminations werecarried outbyallunitsoftaxorgans, in1996theexaminations wereperformed
onlybycurrency control departments, whose totalstaffinUkraine amounts to3,156. Thatmeans that
every taxorgan employee istoexamine 191business entities quarterly.
At3,815 enterprises were revealed cases ofconcealment orunderreporting ofcurrency
assets heldabroad, withthelatter amounting toUS$142 million, f.1.3million, 13.9million UHR,
Rub306.7 billion (Russian Federation) andRbl9.9(Belarus), etc.Based ontherevealed factsinvolvingWT/ACC/UKR/48
Page40
violations related todeclaring currency assets andunlawful transfer ofcurrency assets, incomes and
property outside Ukraine, thetaxorgans have submitted evidence containing materials on2,528
enterprises tothelawenforcing bodies, prosecutors departments andbranches oftheNational Bank
ofUkraine sothatthelatter could takenecessary actions.
Inaddition tothat,thelocal currency control departments, inaccordance withtheplanof
economic andcontrol measures for1996, haveexamined enterprises subordinated toDerzhkharchoprom
(Food Industry Ministry ),Minprom (Industry Ministry), Ministry ofCulture, Ukrainian Concern of
Artistic Works andMinistry ofAgriculture andFoodstuff. Inthecontext oftheprogram forfighting
corruption andorganized crime, theunitshaveconducted investigation ofbusiness entities thatwere
carrying onforeign trade transactions involving trade inmineral fertilizers, sugar, alcohol, ferrous
andnon-ferrous metals, oil,rawhide.
Departments ofcurrency control continue their work aimed atensuring business entities '
compliance withrequirements ofeffective lawsofUkraine.
ONTHE AMOUNTS OFTAX EXEMPTIONS AND PRIVILEGES BYSPECIFIC TAXES AND
EXEMPTIONS ASOF1JULY 1997
By1January 1997 there wereregistered 627,543 taxpayers (based onthedataofthereport
2-P"Ontheresults ofcontrolling measures carried outbystatetaxadministrations", code300), of
which 389,929 taxpayers (62.3 percentofallregistered taxpayers) filedreturns onamounts intax
privileges granted tothem.
Infirsthalfof1997 88,882 taxpayers (22.8 percentofthetaxpayers thathavefiledreturns)
wereenjoying taxprivileges, while 301,047 payers (77.2 percent)reported thattheywerenotusing
taxprivileges.
Over thefirsthalfof1997 156,599 taxprivileges were granted, which amounts onaverage
to1.8taxprivilege peronetaxpayer ofthose whohavefiledareturn.
Theamount oftaxes notpaidduetotaxprivileges inthefirsthalfayearamounted to
8,844,345,000 UHR, which accounts for91.2percentoftheamount ofactual revenues (based on
thedataofthereport 1-P"Ontheamounts ofactual revenues ofthebudget ofUkraine from taxes
andnon-tax payments", code09990).
Byoblasts:
Dnipropetrovsk -192.2 percent
Zaporizhia -161.9 percent
Rivne -141.7 percent
Kyiv city -138.8 percent
Donetsk -123.3 percent
Chernivetsk -25.5per cent
Volyn -26.2percent
Zakarpatska -28.6percent
Chernihiv -28.9percent
Ivano-Frankivsk -29.5percentWT/ACC/UKR/48
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Theaverage amount oftaxprivileges peronepayer amounted to100,000 UHR, withthe
breakdown byindividual oblasts asfollows:
Dnipropetrovsk -192,000 UHR
Zaporizhia -226,000 UHR
Rivne -80,000 UHR
Kyiv city -285,000 UHR
Donetsk -171,000 UHR
Ivano-Frankivsk -40,000 UHR
Chernihiv -28,000 UHR
Zakarpatie -23,000 UHR
Volyn -16,000 UHR
Chernivetsk -18,000 UHR.
Information onthesums ofreceived taxprivileges bytaxes andprivileges (exemptions) for
every kindoftaxes isprovided inAnnex 1.WT/ACC/UKR/48
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ANNEX 1
Information ontheSums ofTaxPrivileges Received by1July1997 ByCategories ofTaxes andFees
Section Number of
entities granted
taxprivilegesNumber of
privilegesRevenues uncollected duetotaxprivileges
Code Total State Budget Local Budget
1 2 3 4
002 Enterprise Profits Tax(Total) 38276 61606 1106218.047 324117.758 782100.289
003 Value Added Tax 42295 50998 7117279.007 4319076.739 2798202.268
004 Excise Tax-Total 157 186 226085.081 179563.765 46521.316
008 Incomes from Foreign Economic
Activity 90 91 6461.364 6461.364 0.000
011 State Duty 14 14 285.932 285.932 0.000
012 Feesandother nontaxable profits 2 2 18.424 18.424 0.000
013 Payment forspecial useofwater
resources 10208 10462 73128.654 50361.171 22767.483
014 Feesestablished bylocalcouncils
ofPeople 'sdeputies 7436 7453 12175.431 0.000 12175.431
016 Payment forspecial use/
extraction ofmineral deposits 1 1 0.014 0.000 0.014
018 Taxoncarsandother
self-propelled machines owners 9487 9750 8405.225 0.000 8405.225
027 Geological prospecting 1 1 0.013 0.013 0.000
037 Payment forland 14505 15696 275853.895 82684.213 193169.682
888 Unspecified payments thatmust
beincluded inrevenues 320 339 18433.840 3531.050 14902.790
Total 8844344.927 4966100.429 3878244.498
Total number ofentities granted taxprivilege: 88,882 (each entity iscounted once, regardless ofnumber ofprivileges)
Number oftax payers notgranted taxprivileges: 30,1047 (taxpayers thathavefieldreturns)WT/ACC/UKR/48
Page43
Structure ontheamount ofprivileges bytaxes:
- Enterprise/Organizations Profit Tax(Total) -39.3percent
- Value Added Tax-32.6percent
- Payment forSpecial UseofWater Resources -6.7percent
- FeesEstablished byLocal Radas ofPeople 'sDeputies -4.8percent
- TaxonOwners ofVehicles andOther SelfPropelled Machines andMechanisms -6.2percent
- Payment forLand -10.0percent
- Other -0.4percent