Dentons Kyiv Tax Newsletter

Dentons, Kyiv, Ukraine, 
Wed, March 4, 2015

The Verkhovna Rada of Ukraine has urgently adoptedseveral laws relating to taxation on March 2, 2015. However, significantchanges to the draft laws were introduced in the voting process, and the finaltext of the laws passed by the Verkhovna Rada of Ukraine is not yet officiallyavailable. However, given the significant impact that these laws have onbusiness, we draw your attention to key points arising from the published textsof the draft laws or from reports in the press.

All newly adopted laws must be signed by thePresident of Ukraine and officially published.

Increased rates of rent for the use of mineral resources

The Draft Lawon Amendments to articles 165 and 252 of the Tax Code of Ukraine, registered bythe Verkhovna Rada of Ukraine under number 2213.

The Draft Lawincludes the following main changes:

·        The increase of rent payment from 20% to 70% for the extraction of naturalgas extracted from deposits of up to 5000 meters sold by NJSC “NaftogasUkraine” for the needs of the population. This means that changes shall notinfluence the private extractors selling extracted natural gas to companiesother than NJSC “Naftogas Ukraine” and for other purposes. Their rent rate willremain at 55%;

·        Ability to use adjustment coefficient of 0.55 for rent payment with respectto the extraction of natural gas produced not for the needs of the population,including during the pilot operation (geological studies), which is listed inthe State Register of oil and gas wells after August 1, 2014 (for two yearsafter the date of entering such wells to said Register). It should be noted that theadjustment coefficient is applied regardless of the form of ownership ofextractor, customers or consumers.

It is envisagedthat these changes will take effect from the date the Law is published.

Changes to the State Budget for 2015

The Draft Lawon amending the Law of Ukraine on State budget for 2015, registered by theVerkhovna Rada of Ukraine under number 2147.

With the DraftLaw, in particular, budget revenues of Ukraine increased compared to theprevious version of the state budget by 4.6%, while expenses of the statebudget of Ukraine increased by 6.6%. The Draft Law also provides for areduction of GDP in 2015 to 5.5% with inflation at 26.5%.

Reducingthe amount of single social contribution

Draft Law onAmendments to Chapter VIII “Transitional Provisions” of the Law of Ukraine “Onthe collection and accounting of a single contribution for obligatory statesocial insurance” (to reduce the burden on the payroll), registered by theVerkhovna Rada of Ukraine under  number1863.

The Draft Law,in particular, specifies criteria for the possibility of reducing the rates ofsingle social contribution in the calculation of wages (income) to individualsand/or in the calculation of remuneration under the civil contracts by applyingthe reduction coefficient of 0.4 in 2015, provided the taxpayer hassimultaneously fulfilled certain conditions:

·        The accrual base of the single contribution per one insured person in thereporting month increased by 20 percent or more compared with average monthlyaccrual base of the single contribution for 2014 per one insured person.

·        After applying the coefficient for the average payment per insured personin the reporting month it will be not less than the average payment per insuredperson in 2014.

·        The number of insured persons in the reporting month does not exceed 200%of the average number of insured persons in 2014.

The Draft Lawalso provides for the use of a coefficient of 0.6 as of January 1, 2016 in thecalculation of wages (income) to individuals and/or in the calculation ofremuneration under the civil contracts to single social contribution ratesestablished by the Law of Ukraine “On the collection and accounting of a singlecontribution for obligatory state social insurance,” with certain restrictions.

Thus, incomparison with the previous attempt to reduce the size of a single socialcontribution by applying the reduction coefficient, which was introduced by theLaw on “Reform of Compulsory State Social Insurance and Legalization ofPayroll” №77 of December 28, 2014, the Draft Law provides for amendments tospecial laws governing the collection and accounting of a single socialcontribution which prevents competition by the provisions of the laws.Additionally, it should be noted that the Draft Law introduced a formula tocalculate the coefficient by the taxpayers independently, something that wasmissing in the previous version changes.

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