SALANS KYIV TAX NEWSLETTER - APRIL 2009
Salans Kyiv Tax Newsletter, Kyiv, Ukraine, April 2009
KYIV - Salans has just issued the April 2009 Tax Newsletter. IN THIS ISSUE:
1. Ukrainian Parliament Imposes Temporary Additional Import Duty
2. Ukrainian Government Allows Purchase of Grain at the Expense of VAT Refund
3. Taxation of Funds Received by a Representative Office from its Head Office
4. Ukrainian Parliament Imposes State Duty on Registration of Securities
5. Inclusion of Royalties in the Customs Value of Imported Goods – Ukrainian Practice is Set to Change
6. Increase in Excise Duty on Tobacco Products
7. Decrease in Vehicle Tax Rates
1. Ukrainian Parliament Imposes Temporary Additional Import Duty
The Ukrainian parliament passed the law “On Amending Certain Legislative Acts with a view to Improving the Ukrainian Payment Balance in Connection with the World Financial Crisis”. The law became effective on 7 March 2009.
The aim of the law is to restore the Ukrainian payment balance. For this purpose, the law imposes a temporary additional import duty of 13% for certain categories of goods (e.g. cars, meat, wine and ethyl spirit). According to the law, the duty will be effective for a 6 month period.
The imposition of the additional import duty appears to be questionable vis-à-vis Ukraine’s WTO obligations. The law has also raised concerns in the Ukrainian business environment. In view of this, on 18 March 2009 the Ukrainian Cabinet of Ministers passed a resolution to cancel the 13% additional import duty for all categories of goods, except for cars and refrigerators.
2. Ukrainian Government Allows Purchase of Grain at the Expense of VAT Refund
On 4 February 2009, the Ukrainian Cabinet of Ministers passed the resolution “On Approving the Procedure for Purchasing Grain from the State Food Reserve by Grain Exporters in 2009”. The resolution provides for a mechanism of purchasing grain by grain exporters from the state food reserve in exchange for a forfeiture of their VAT refund.
3. Taxation of Funds Received by a Representative Office from its Head Office
In letter No. 326/7/16-1517 dated 12.01.2009 the State Tax Administration of Ukraine confirmed its previous position regarding the taxation of funds received by a representative office (being a permanent establishment) in Ukraine from its head office. Specifically, such funds must be treated as taxable income for the representative office for corporate profit tax purposes.
4. Ukrainian Parliament Imposes State Duty on Registration of Securities
On 19 March 2009, the Ukrainian parliament passed the law “On Amending the Decree of the Ukrainian Cabinet of Ministers ‘On State Duty’ regarding Transactions involving Securities”.
The law introduces a state duty of 0.1% (but no more than 5 times the minimum wage as of 1 January of the current year [UAH3025]) for the registration of securities (except for state and local bonds) and a state duty of 50 times the tax-free allowance (currently – UAH850) for the registration of derivatives.
The law has not been signed by the Ukrainian president and, accordingly, has not yet become effective.
5. Inclusion of Royalties in the Customs Value of Imported Goods – Ukrainian Practice is Set to Change
On 25 December 2008, the Ukrainian State Customs Service issued explanatory letter No. 11/2-16/14148-ЕП regarding the inclusion of royalties (payments for the use of IP rights) in the customs value of imported goods for the purposes of paying customs import duties and VAT.
The Ukrainian State Customs Service explained that a Ukrainian importer (buyer) must include royalties in the customs value of imported goods provided that: (1) such royalties relate to the imported goods; and (2) the importer is obliged to pay the royalties directly or indirectly as a precondition to sale of the imported goods by the foreign supplier.
In its explanatory letter the Ukrainian State Customs Service emphasizes that customs authorities may, in particular, refuse to admit imported goods into Ukraine if the importer pays royalties, but has failed to add such royalties to the customs value of the imported goods.
It is worth mentioning that the requirement for royalties to be included in the customs value of imported goods was introduced in Ukraine from 1 January 2004 by adopting the new customs code. However, until recently the Ukrainian customs authorities have been “shutting their eyes” regarding the respective provisions of the Ukrainian Customs Code. The issuing of this letter appears to signal that the customs authorities have started paying attention to this issue.
6. Increase in Excise Duty on Tobacco Products
On 31 March 2009, the Ukrainian parliament passed the law “On Amending Certain Legislative Acts of Ukraine relating to Excise Duty Issues”. The law provides for an increase in excise duty rates on tobacco products.
In particular, the excise duty on filter cigarettes will be increased from UAH37.50 to UAH60 per 1000 items and from 16% to 20% of the product turnover.
The law will become effective from 1 May 2009 if signed by the Ukrainian president.
7. Decrease in Vehicle Tax Rates
On 5 March 2009, the Ukrainian parliament passed the law “On Amending the Law of Ukraine on Vehicles Owners Tax regarding Tax Rates”. The law provides for a substantial decrease in certain vehicle tax rates.
In particular, the vehicle tax rates on cars with an engine capacity of 2500 cubic centimetres and over which are subject to registration, re-registration and technical inspection have decreased from UAH75-120 to UAH25-40 per 100 cubic centimetres. The rates for new cars with an engine capacity of 2500 cubic centimetres and over which are subject to first registration in Ukraine have decreased from UAH75-120 to UAH25-40 per 100 cubic centimetres.
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CONTACT: For further information regarding Salans Kyiv Tax practice, please contact: Oleg V. Batyuk, Managing Partner, Tel: +380 44 494 4774, E-mail: obatyuk@salans.com; Igor Davydenko, Partner, Head of Tax Practice, Kyiv, Tel: +380 44 494 4774, E-mail: idavidenko@salans.com; Sergiy Melnyk
Associate, Tel: +380 44 494 4774; E-mail: smelnyk@salans.com. SALANS, 49-A, Volodymyrska Street, 2nd floor, 01034 Kyiv, Ukraine, Tel: +380 44 494 4774, Fax: +380 44 494 1991, Website: www.salans.com, E-mail: kyiv@salans.com.
