Ukraine: Updates in Legislation (2008)

On 1 January 2008, a number of changes in Ukrainian legislation came in to effective. The following is a summary of the most important changes.

Corporate Profits Tax

• Taxpayers will have to pay corporate profit tax and file tax returns for 11 month period in addition to quarterly;
• The provision limiting the tax losses carry forward has been eliminated.
  Value Added Tax
• Taxpayers are entitled to a tax refund amounting to the tax actually paid by them in the previous reporting periods (previous limitation to one period has been eliminated);
• Supply of milk and meat to processing companies by farmers will be zero-rated until 1 January of the year following the year in which Ukraine joins the World Trade Organisation;
• Supply of ferrous metal scrape and waste, including the import of such goods, will be temporarily tax exempt until 1 January 2009;
• Deferral from the payment of "import" VAT is prohibited for the importation of oil-well gas and other gas hydrocarbons (Codes 2709 00, 2710, 2711);
• Taxpayers exporting goods from Ukraine within barter transactions are entitled to a tax credit.

Personal Income Tax and Payroll Taxes

• Interest earned on the securities issued by the Government of Ukraine is not subject to tax;
• The payroll cap for 2008 increases to UAH9,495 from 1 January, UAH9,705 from 1 April, UAH9,735 from 1 July and UAH10,035 from 1 October. So far it is not clear whether this cap applies to payments to the Ukrainian accident insurance fund;
• The subsistence minimum for 2008 is UAH633 from 1 January, UAH647 from 1 April, UAH649 from 1 July and UAH669 from 1 October;
• The minimum monthly salary for 2008 is UAH515 from 1 January, UAH525 from 1 April, UAH545 from 1 October and UAH605 from 1 December;
• The Ukrainian pension fund contribution payable by an employee is 2%.

Land Issues

• The agricultural land sale moratorium continues;
• State and local land may be sold and/or leased only at auctions;
• The land tax rate regarding land that has not been appraised is increased fivefold;
• Land tax on a land plot which is purchased under a civil contract is calculated on the basis of the higher of the appraised value or the contractual value of the land;
• The annual lease payment for state or local land cannot exceed 12% of the appraised value of the land and cannot be less than land tax for agricultural land or 3 times the land tax for the other categories of land;
• Unfinished construction projects will be privatised at auctions together with the land plot where the construction is located.

Rental Payments

• Natural gas production for population needs:
  • UAH50 per 1,000 cubic metres for gas extracted from depths up to 5,000 metres;
  • UAH40 per 1,000 cubic metres for gas extracted from deeper than 5,000 metres, and
  • UAH10 per 1,000 cubic metres for gas extracted from the continental shelf and the exclusive maritime economic zone of Ukraine;
• Natural gas production for other needs:
  • UAH200 per 1,000 cubic metres of gas extracted from depths up to 5,000 metres, and
  • UAH100 per 1,000 cubic metres of gas extracted from deeper than 5,000 metres;
• The coefficient applied to tariffs for geological exploration changes from 2.11 to 2.27;
• Rental payments for the transportation of natural gas, oil, oil products and ammonia remain unchanged;
• The Law of Ukraine "On Rental Payments for Oil, Natural Gas and Gas Condensate" remains suspended.

Excise Duty

• New excise duty stamps are introduced for alcohol beverages. These have to describe, amongst other things, the amount of excise duty for the stamped product. The Ukrainian government has yet to approve the relevant procedures;
• The excise duty for cigarettes with filters increases to UAH14 per 1,000 cigarettes and to 12.5% of turnover. The excise duty for cigarettes without filters remains UAH5 per 1,000 cigarettes and increases to 12.5% of turnover;
• Excise duty can not be less than UAH8 per 1,000 cigarettes without filters and UAH18 per 1,000 cigarettes with filters;
• Excise duty for alcohol-containing beverages increases to UAH12.5 per 1 litre of 100% alcohol;
• Excise duty for alcohol distillers and alcoholic beverages extracted from grape wine or grapes is UAH10 per 1 litre of 100% alcohol.

Miscellaneous

• Pension fund duty on the purchase of foreign currency by Ukrainian legal entities decreases to 0.5%;
• Taxpayers changing their legal address continue to pay taxes at the place of their previous registration until the end of calendar year;
• Import duty and VAT privileges are prohibited for excisable goods and goods from Groups 1 - 24 of the Ukrainian Foreign Trade Goods Classification which are to be imported to Ukrainian special (free) economic zones and territories of priority development;
• The period in which goods (works, services) acquired by Ukrainian residents from non-Ukrainian sellers must be imported, if paid for in advance, and the period in which the proceeds from sales of Ukrainian sellers to non-Ukrainian buyers must be credited with bank accounts, increases to 180 calendar days. Extensions are available with the approval of the relevant Ukrainian ministry. The penalty remains at 0.3% for each day of delay, but now cannot exceed the value of the undelivered goods (works, services) or underpayment;
• The National Bank of Ukraine’s prime rate is 10%;
• The maximum interest rates and the loan registration requirements established by the National Bank of Ukraine for foreign loans to Ukrainian borrowers do not apply to loans from the European Bank for Reconstruction and Development;
• Customs duties will apply until Ukraine joins the World Trade Organization.