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• Procedure for compensation of the Unified Social Tax expenses for employer is now approved

On 20 March 2013 Resolution of the Cabinet of Ministers #153 of 13 March 2013, which approved the Procedure on compensation of the Unified Social Tax expenses for employer (hereinafter – the Resolution), took legal force.

The Resolution was adopted pursuant to paragraph 24.3 of article 24 of the Law of Ukraine “On employment” of 5 July 2012, which gives an employer the right to compensation for that part of its expenses related to paying the Unified Social Tax (hereinafter – the UST).

The Resolution applies to all employers except for:
• economic agents created due to liquidation of other legal entities within 12 months prior to the creation of the new entity;
• budget-funded institutions.

Employers who starting in 2013 create new jobs and pay salaries to newly hired employees at a rate not less than three minimum wages within the first 12 months can benefit from the new rule.

If it meets the above requirements, an employer is entitled to compensation for 50% of the UST accrued within 12 calendar months following the 12-month period that starts on the day on which the employment agreement is concluded, provided that the salary mentioned above is preserved.

An employer retains the right to the UST compensation if it terminates an employment agreement with an employee and hires a new one under the same terms. In the case of staff cuts and decrease of the salary fund, however, the employer loses its right to compensation.

To obtain compensation the employer submits a certificate on compliance with the terms of compensation according to the template approved by the Resolution within 12 months from the day on which the employment agreement is concluded with an employee hired for a new position. This certificate should be filed with the Pension Fund of Ukraine in the location in which the employer is registered as the UST-payer.

Having received the certificate, the Pension Fund engages the State Labor Committee to validate the information it contains. In case the information is found accurate and based on the UST reports for 12 months following the conclusion of the employment agreement within 10 days the Pension Fund makes a decision on the UST compensation.

Monthly compensation of the UST is paid out for a period of 12 months upon the expiration of the identical period starting on the day on which is concluded an employment agreement with the individual employed in the newly created position based on the employer’s report. The money is transferred from a Pension Fund account to the employer’s bank account.

We will provide periodic updates on the changes in employment regulations and keep you informed.