Minimum subsistence income and minimum wage

On 7 December 2017, the Supreme Council adopted the Law On the 2018 State Budget of Ukraine, No. 1801-VIII (hereinafter referred to as the “State Budget Law”). The State Budget Law introduces a new minimum subsistence income and minimum wage, which are to enter into full force and effect from 1 January 2018: 

  • The minimum subsistence income is determined as follows: from 1 January 2018 – UAH 1,700.00, from 1 July — UAH 1,777.00, and from 1 December — UAH 1,853.00
  • The minimum subsistence income for employable individuals is determined as follows: from 1 January 2018 – UAH 1,762.00, from 1 July – UAH 1,841.00, and from 1 December – UAH 1,921.00
  • The minimum wage is set at the following level: from 1 January 2017 – UAH 3,723.00; on the “per hour” basis: UAH 22.41.

Amendments to the tax code

On 7 December 2017, the Supreme Council adopted Draft Bill No. 6776-d dated 14.11.2017 On Introduction of Amendments into the Tax Code of Ukraine for the purpose of ensuring the budget proceeds balance in 2018 (hereinafter referred to as the “Amendments to the Tax Code”). The Law introduces such innovations:

Definitions

  • Innovations were introduced into the definition (criteria) of big tax payers
  • The notion of “new well” was introduced for the purpose of correct application of the specific rent for production of natural gas
  • Introduction of a more precise definition of related parties for the purposes of transfer price formation
  • Supplements were introduced into the list of payments, which are not deemed a royalty; specifically, the following payment was introduced: payment due for transfer of the right for distribution of copies of intellectual property objects, without the right to their reproduction
  • Definition of “syndicated financial credit” was introduced.

The list of controlled transactions was extended

  • The controlled transactions were supplemented with a new subsection “ґ”, which includes “business transactions, which are carried out between a non-resident and its permanent representative office in Ukraine.”

Administration

  • A 60-day period under review was introduced for filing the annual corporate profit tax declaration by companies
  • Payers of the single tax were released from payment of advance installment in the instances when dividends are subject to payment
  • Accounting rules were established with respect to non-principal place of tax registration of a big tax payer and such accounting rules are pertaining to taxable objects of such tax payer
  • Taxation rules for the withholding tax accruing on interests due under syndicated loan were determined in the instances, when Ukraine’s international treaties are subject to application
  • Liability was established – in the form of striking off the Register – for religious organizations. The liability arises if requirements governing incorporation, registration and utilization of derived incomes (profits) are violated
  • It was determined as follows: for religious organizations, it is sufficient to comply only with the requirement related to incorporation and registration that must be conducted pursuant to the procedure established by the laws governing operations of relevant non-profit-making organization.

VAT

  • The introduced supplement included the provisions whereby registration of VAT invoice/calculation of adjustment in the Unified Register of VAT Invoices may be suspended subject to the procedure and grounds determined by the Cabinet of Ministers of Ukraine
  • It was proposed to extend application of the VAT rate amounting to 7%, to the import and supply to the customs territory of Ukraine, of all medical products, which are entered into the State Register of Medical Devices and Products with Medical Designation
  • Benefits were established in the instances, when the equipment classified according to the defined goods’ subcategories in accordance with Ukrainian Classifier of Goods of Foreign Economic Activity, is imported into the customs territory of Ukraine pursuant to the import customs regime (before 1 January 2020): instalments (payments in equal parts) are introduced for payment of value-added tax during the period of time, which is not exceeding 24 calendar months.

Other innovations

  • A restriction was introduced: it relates to the import into the customs territory of Ukraine, of the goods, whose total actual value does not exceed the equivalent of €150, in unaccompanied shipments
  • The requirement regarding the necessity to comply with “not low” tax non-resident’s status in connection with placement of Eurobonds was excluded
  • Approach to registration, for the profit tax purposes, of recording results for the bank’s reserves and re-calculation of such reserves, was amended
  • It was proposed to introduce more precise definitions in the existing regulations in order to have a clear possibility to audit the transfer price formation transactions conducted in 2013-2014
  • Excise and environmental duties rates were changed.

Rental payments

  • It is proposed to reduce the rental payment rate from 45% down to 29% and from 21% down to 14%, to ensure that they are equated with the natural gas and oil rent rates. Date of entry into full force and effect: 01.01.2019
  • It is proposed to determine an individual rate for gas rent attributable to new wells. Date of entry into full force and effect: 01.01.2019:
    • Natural gas mined from new wells, horizons which are fully or partially hosted at a depth of up to 5000 meters (except for the natural gas mined during performance of joint activities agreements) -12%
    • Natural gas mined from new wells, horizons which are fully or partially hosted at a depth exceeding 5000 meters (except for the natural gas mined during performance of joint activities agreements) – 6%.

The aforesaid amendments have been prepared on the basis of a comparative table compiled for the second reading of the Draft Bill “Amendments into the Tax Code”.

It should be pointed out that on 8 December 2017, the Draft Decree was registered, seeking reversal of the resolution of the Supreme Council of Ukraine dated 07.12.2017 regarding approval, in totality, as a law of the Draft Bill “Amendments into the Tax Code of Ukraine for the purpose of ensuring the budget proceeds balance in 2018” (Draft Bill “Amendments into the Tax Code”).

The final list and status of amendments will be provided after their official publication of the text of the Law.