|Human Capital News: The new simplified system of taxation starting from 1 January 2012|
Ernst & Young LLC, Kyiv, Ukraine, Tuesday, November 29, 2011
The Ukrainian Parliament passed the Law "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on the Simplified System of Taxation, Accounting and Reporting" of 4 November 2011 8 4014-VI (hereinafter - the Law) with amendments by the President of Ukraine. The law takes force on 1 January 2012, introducing new rules for the simplified system of taxation. Below we provide a brief overview of the most significant changes.
Starting from 1 January 2012 expenses incurred by payers of the corporate profit tax with respect to purchase of goods (works, services) from private entrepreneurs-payers of single tax will be deductible. Taxpayers are obliged to submit, along with corporate profit tax returns, a breakdown of income and expenses with respect to contractors-payers of single tax.
According to the Law, single tax payers will be divided into four groups:
Group 1 - private entrepreneurs who do not employ individuals and who are engaged solely in retail and/or in providing household services1 to individuals, and whose annual income does not exceed UAH 150k;
Group 2 - private entrepreneurs who provide services, including household services, to single tax payers and/or individuals and who produce and/or sell goods; restaurant managers, provided that during the calendar year they meet all the following criteria; they do not employ individuals or the number of their employees does not exceed 10 individuals at a time, and their annual income does not exceed UAH 1 million. This group does not include entrepreneurs who provide intermediary services related to purchase, sale, leasing and assessment of real estate. Such entrepreneurs belong to the 3rd group, provided that they meet the criteria established for it;
Group 3 - private entrepreneurs who do not employ individuals or whose number of employees does not exceed 20 individuals at a time and whose annual income does not exceed UAH 3 million:
Group 4 - legal entities of any legal organizational form that during a calendar year have an average headcount of not more than 50 individuals, and the annual income of which does not exceed UAH 5 million.
The law establishes a list of business activities that cannot be carried out under the simplified system of taxation, in particular: gambling industry activity; foreign currency exchange; circulation of excisable goods; circulation of precious metals and precious stones; individuals leasing out land of more than 0.2 hectares, accommodations of more than 100 square meters or non-residential premises of more than 300 square meters, etc.
The law provides for new single tax rates:
1. The fixed single tax rate set by the local authorities per month depending on type of business activity will be: 1-10% of the minimum wage established on 1 January of the reporting year for Group 1; 2-20% of the minimum wage for Group 2. The local authorities' decision about the single tax rate shall apply starting from 1 January 2012.
2. Tax rates of 3% of income (including VAT) and 5% of income (excluding VAT) have been established for Group 3 and Group 4.
3. A single tax rate of 15% has been set for taxpayers of Groups 1, 2 and 3 and applies to the amount exceeding the amount of income established for each group; to income derived from business activities that are not specified in the certificates of Group 1 or 2 taxpayers; and to income obtained using non-cash payment methods and to income derived from activities that are not allowed under the simplified system of taxation.
4. The double tax rates that have been set for Group 4 taxpayers apply to the amount exceeding the limit that allows for applying the simplified system of taxation; and to income obtained using non-cash payment methods and to income derived from activities that are not allowed under the simplified system of taxation.
As for the tax payment deadlines, Group 1 and 2 taxpayers make single tax payments monthly, not later than the 20th day (inclusive), with the possibility of making advance tax payments for the entire reporting period, (only by the end of the current reporting year). Group 3 and 4 taxpayers make tax payments quarterly within 10 calendar days after the deadline for filing the quarterly tax return.
In order to obtain a single tax payer certificate starting from 1 January 2012, private entrepreneurs who decided to switch to the simplified system of taxation starting from 1 January 2012 and meet the requirements regarding the simplified system of taxation established by the Tax Code must file an application with the state tax authorities not later than 25 January 2012.
In view of this Law. certain legislative acts cease to be in force.
We will continue monitoring the changes and inform you about any updates with respect to personal income tax and other relevant issues accordingly.