Lawyers of LF «Dmitrieva & Partners» have prepared the list of top news in the field of taxation and ATO for the last two weeks

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1 REVIEW OF THE MAIN EVENTS IN THE SPHERE OF TAXATION AND ATO Lawyers of LF «Dmitrieva & Partners» have prepared the list of top news in the field of taxation and ATO for the last two weeks Taxation of real estate in the territory of the Autonomous Republic of Crimea State Fiscal Service (18/03/2015) The object of residential and non-residential real estate, including its share, are subject to taxation (sub-paragraph of paragraph of article 266 of the Code). Taxpayers are natural and legal persons, including non-residents, who are the owners of real estate (sub-paragraph of paragraph of article 266 of the Tax Code of Ukraine). Tax rates are set by decisions of local councils, depending on location (zoning) and types of such objects of real estate in the amount not exceeding 2 percent of the minimum wage, established by the law as of January 1 of the reporting (tax) year, per 1 square meter of the base of taxation (sub-paragraph of paragraph of article 266 of the Code). The tax is paid at the place of location of the object of taxation. Attorney-at-Law, Managing Partner Dmitrieva@dmp.com.ua By article 1 of the Law of Ukraine of April 15, 2014 No 1207 On Provision of Rights and Freedoms of Citizens and Legal Regime in the Temporarily Occupied Territory of Ukraine the temporarily occupied territory is the territory of the AR of Crimea and Sevastopol which is the integral part of the territory of Ukraine and which is covered by the Constitution and laws of Ukraine. By the Law of Ukraine of August 12, 2014 No 1636-VII On Creation of the Free Economic Zone The Crimea and on Peculiarities of Carrying out of Economic Activity in the Temporarily Occupied Territory of Ukraine the free economic zone "The Crimea" is created within two administrativeterritorial units of Ukraine: the Autonomous Republic of Crimea and Sevastopol and the peculiarities of carrying out of economic activity in the temporarily occupied territory of Ukraine are determined in accordance with article 13 of Law No Taking into account the difficult economic and political situation in the country, as well as with the purpose of fulfilment of obligations in respect of payment of taxes by individuals who are the owners of residential and/or non-residential real estate in the territory of the Autonomous Republic of Crimea and Sevastopol., the SFS of Ukraine offers to file tax returns to the supervisory authority at the place of their location and to pay tax on immovable property, other than land, to the local budget at the place of their location.

2 Military duty on certain types of personal income State Fiscal Service (letter No 5346/6/ of 03/03/2015) Temporarily, until the entry into force of the decision of the Verkhovna Rada of Ukraine on completion of the reform of the Armed Forces of Ukraine, the military duty at the rate of 1.5 per cent of the object of taxation is established (by paragraph 161 of subsection 10 of section XX of the Transitional Provisions of the Tax Code of Ukraine) The duty payers are persons determined by p of art. 162 of the Code, namely, natural persons - residents. The object of taxation is income set by art. 163 of the Code, namely, total monthly (annual) taxable income (sub-paragraph 1.1 of paragraph 161 of subsection 10 of section XX of the Code). The total monthly annual taxable income also includes the amounts of pensions received by a taxpayer from the Pension Fund of Ukraine or the budget under the law, if their amount exceeds three minimum wages (per month), established as of January 1 of the reporting tax year, - in the part of such an excess (sub-p of p of art. 164 of the Code) The total monthly (annual) taxable income of a taxpayer does not include: - the cost of gifts if their value does not exceed 50 percent of one minimum salary (per month), established as of January 1 of the reporting tax year; - the amount of pensions (including the amount of their indexation charged under the law), received by a taxpayer from the Pension Fund of Ukraine or the budget under the law, except for the case specified in sub-p of p of art. 164 of the Code (sub-p. "e" of sub-p of p of art. 165 of the Code). The total monthly (annual) taxable income of a taxpayer in 2015 does not include the amount of pension of 3654 UAH (1218 UAH x 3), the value of gifts not exceeding the amount of 609 UAH. If the amount of pension and the cost of gifts in 2015 exceed indicated amounts, then parts of such exceedings are included in the total monthly (annual) taxable income of a taxpayer and are subject to the military duty at the rate of 1.5 percent. By letter dated /17605 the NBU bring to clients notion the information notice of the SFS received on 17/03/2015. So, on in the Committee of the Verkhovna Rada of Ukraine on Taxation and Customs Policy the meeting was held, namely, regarding the removal of personal income received from operations with currency values from the object of taxation by the military duty, including transactions of exchange of national and foreign currency by citizens. Such transactions are not subject to tax on personal income. Following the discussion, participants of the meeting came to the joint decision on the need to introduce such changes to the Tax Code of Ukraine in the near future. The National Bank, from its part, will make every effort to resolve this issue as soon as possible. Regarding payment from 01/01/2015 of the excise tax on retail sales of excisable goods, including petroleum products State Fiscal Service of Ukraine (of p. No 9132/7/ ) The base of taxation of the excise tax is the value (including a value added tax) of excisable goods sold by retail entities (sub-paragraph of p of art. 214 of the Tax Code of Ukraine).

3 Tax rates for excisable goods are set by decisions of local councils at the rate of 5 percent (sub-p of p of art. 215 of the Code), and if such a decision hasn t been passed, this tax is levied using minimum rates (sub-p of p of art. 12 of the Code) - 5 percent. The object of the excise tax are, in particular, the transactions of sale of excisable goods by retail entities (sub-p of p of art. 213 of the Code). The date of accrual of tax obligations in respect of the sale by retail entities of excisable goods is the date of conduct of a payment transaction in accordance with the Law of Ukraine of July 6, 1995 No 265/95-VR On the Use of Payment Transactions Recorders in the Sphere of Trade, Public Catering and Services (hereinafter - Law No 265), and in the case of the sale of goods by individual entrepreneurs who pay a single tax it is the date of receipt of payment for the goods sold (p of art. 216 of the Code). Transactions of retail sale of petroleum products to a final consumer Attorney-at-Law through the network of filling stations (p. 2 of Regulations No 1442 and Ignatova@dmp.com.ua SSTU 4303:2004 "Retail and Wholesale. Terms and Definitions") are subject to the excise tax in accordance with sub-p of p of art. 213 of the Code. Who is the payer of the excise tax - the operator of the market of oil products, operator of filling stations, economic agent intermediary or economic agent, non-cash customers receiving oil products through filling stations? According to sub-p of p of art. 212 of the Code the taxpayer is the person retail entity that sells excisable goods directly to citizens and other end users for their personal, noncommercial use. In accordance with Regulations No 1442 retail sale of petroleum products is carried out through the network of filling stations intended for delivery to end users of petroleum products (p. 2 of Regulations No 1442 and SSTU 4303:2004 "Retail and Wholesale. Terms and Definitions"). In accordance with Regulations No 1442 payments for petroleum products sold are made in cash and/or non-cash form (using payment cards, coupons, the list of delivery of petroleum products, etc.) in the order established by the legislation. Thus, the person who performs direct supply of petroleum products through the network of filling stations (FS) directly to consumers, regardless of the conditions of the sale of petroleum products and form of payments (cash, cashless) when making payments has tax obligations in respect of payment 5 percent excise tax on the retail sale of excisable goods. Taxation by environmental tax of dumpings polluting water By Letter of the SFS of /7/ tax officers have explained that the tax liability in respect of the environmental tax is calculated as the algebraic product of the total in the reporting (tax) period of the volume of return water to the value of "mineralization" and the environmental tax rate established for pollutants of the relevant group. At the same time the rate is determined by the concentration of substances in water, above which water is considered unsuitable for particular purposes of water use, and not by "mineralization",

4 i.e. the actual content of pollutants in the return water, which by their chemical composition may be pollutants related to any class of maximum allowable concentration. It should be added that the smaller maximum allowable concentration of pollutants - the higher the rate of the environmental tax is. By Letter of the SFS of /7/ tax officers have informed what to do if the salary of an employee hasn t been included in the SSF report. If the error has been found after the expiry of the period of submission of the SSF report it is not allowed to re-form and resubmit the "initial" report. To correct the error relating to the omission of including the salary of an employee it is required to represent this salary and SSF as additional calculations in the report for the next reporting period. At the same time in Table 6 in the column the code of the calculation type "2" should be indicated. At the same time if the insurer themselves detects false information, submitted after expiration of the reporting period and/or saved in electronic databases of personalized registration, they submit necessary cancelling documents and at the same time initial documents with correct information in respect to one insured person along with the explanatory note regarding change of information. NEWS OF THE ATO Temporarily occupied territories have been defined officially Regulation of the Verkhovna Rada of Ukraine of March 17, VIII On Recognition of Certain Districts, Cities, Towns and Villages of Donetsk and Lugansk Regions as Temporarily Occupied Territories On March 25 Regulation of the Verkhovna Rada of Ukraine of March 17, VIII entered into force, under which certain districts, cities, towns and villages of Donetsk and Lugansk regions, in which according to the Law of Ukraine On Special Order of Local Self-Government in Certain Districts of Donetsk and Lugansk Regions the special order of local self-government is introduced, until removal of all illegal armed groups, Russian occupation troops, their military equipment, as well as gunmen and mercenaries from the territory of Ukraine and restoration of full control of Ukraine of the state border of Ukraine, are recognized temporarily occupied territories. Changes in the Order of Transferring Interbudgetary Transfers to Local Budgets in Localities of Donetsk and Lugansk Regions have been introducted Regulation of the CMU of 23 March On Amendments to Paragraph 2 of the Order of Transferring Interbudgetary Transfers to Local Budgets in Localities of Donetsk and Lugansk Regions, which are located in the territory of conduct of anti-terrorist operation According to these changes the Treasury may make transfers of interbudgetary transfers from the state budget to local budgets of localities in the territory of which the public authorities do not exercise their powers temporarily or do not exercise their powers in full, according to the list approved by the Cabinet of Ministers of Ukraine dated 7 November , but which continue to be serviced by the Treasury bodies. Now the Treasury transfers to the district (city) budgets, which continue to be serviced by the Treasury bodies and on the account of which agencies and institutions situated in the localities in the temporarily uncontrolled territories are financed, subsidies in amounts reduced by the amount of budget allocations provided for such agencies and institutions. The distribution of allocations (taking into account reduced amounts) for such budgets is submitted to the Treasury by the chief administrator of the corresponding subsidy which is granted from the state budget, the day before the deadline for their transfer.

5 Taxation of real estate in the temporarily occupied territory of Ukraine and the territory of conduct of the anti-terrorist operation STATE FISCAL SERVICE OF UKRAINE (18 March 2015) The SFS reminds that the exemption from filing accounts and payment of tax on immovable property, other than land, is not provided by the Law of Ukraine On Temporary Measures for the Period of Conduct of the Anti-Terrorist Operation. Taking into account the difficult economic and political situation in the country, as well as with the purpose of fulfilment of obligations in respect of payment of taxes by persons who are the owners of residential and/or non-residential real estate in the territory of the Autonomous Republic of Crimea and Sevastopol., the SFS of Ukraine offers to file tax returns to the supervisory authority at the place of their location and to pay tax on immovable property, other than land, to the local budget at the place of their location. The territorial authorities of the SFS are entrusted within their competence with functional duties of service of taxpayers registered in the territorial bodies of the SFS, which are located in temporarily uncontrolled territory of Donetsk and Lugansk regions, according to Order of the State Fiscal Service of Ukraine of p. No 256 On the Move and Ending of Stoppage" placed on the official web-portal of the State Fiscal Service of Ukraine. Employment of out-migrants from the zone of ATO and the Crimea Senior lawyer Law of Ukraine "On Amendments to Certain Laws of Ukraine on Strengthening Social Protection of Internally Displaced Persons" of March 5, 2015 No 245-VIII According to these changes, now "periods of employment in the temporarily occupied territory of Ukraine or in the areas of conduct of anti-terrorist operation, which according to the State Register of Compulsory State Social Insurance are not confirmed by payment of a single fee" refer to good reasons enabling unemployment compensation in the event of interruption of insurance standing. Measures of promotion of employment of internally displaced persons who are employed under referral of territorial bodies of the central executive authority that implements the state policy in the field of employment and labor migration are also determined, among them: 1) compensation to a registered unemployed person from the number of internally displaced persons of actual transportation costs of movement to the other administrative-territorial unit of the place of employment, as well as costs for passing under referral of preliminary medical and narcological check-up according to the law, if it is necessary for employment; 2) compensation of costs of an employer on payment for work (but not more than average wages in the relevant region for the last month) for the employment of registered unemployed persons from the number of internally displaced persons subject to conditions of fixed-term labour contracts of not more than six calendar months duration, subject to preservation of employment guarantees of such a person for the period exceeding the duration of payment twice; 3) compensation of costs of an employer who employs registered unemployed persons from the number of internally displaced persons for the period of not less than twelve calendar months, retraining and advanced training of such persons. The amount of the compensation is set within the cost of studies of retraining and advanced training, but cannot exceed tenfold minimum

6 subsistence level for able-bodied persons established by the law as of the date of making such a payment by the employer. At the same time it is provided that in the case of dismissal of the employee, for whom the compensation was paid, by the employer or by consent of parties before expiration of the period of preservation of employment guarantees the amount of paid money is repaid in full to the budget. Moreover, now persons, exempt from military service after participation in conduct of the antiterrorist operation, from the number of disabled before gaining the right to pension are entitled to receive a one-time voucher for maintaining competitiveness through retraining, specialization, advanced training by professions and specialities for priority types of economic activities. Internally displaced persons of active working age in the absence of suitable work and persons exempt from military service (except for enlisted men), service in the bodies of internal affairs, of the State Service for Special Communications and Information Protection of Ukraine, agencies and units of civil protection, tax police or the State Penitentiary Service of Ukraine in connection with redundancy, cutting staff or on health grounds until they reach the established retirement age, in the presence of the period of service of not less than 10 years, who have not acquired the right to pension under the legislation, also have the right to receipt of the said voucher. Unemployment allowance for the registered internally displaced person who has necessary documents for getting of the status of unemployed, but cannot provide information on wages (income) from the last job, is set taking into account the data of the State Register of Compulsory State Social Insurance. Additional measures with respect to social protection of participants of the anti-terrorist operation Decree of the President of Ukraine of March 18, /2015 On Additional Measures with Respect to Social Protection of Participants of the Anti-Terrorist Operation By the said decree the President of Ukraine instructed the Cabinet of Ministers of Ukraine immediately to develop and submit to the Verkhovna Rada of Ukraine bills on amendments to some legislative acts concerning granting the status of a combatant and the status of a war participant, strengthening of the liability of managers of enterprises, institutions, organizations for non-compliance with the requirements of the legislation regarding reservation for employees, called for military service, of the place of employment, position and payment of salary. The following measures were also determined by the President as urgent: - determining the order of housing of families of combatants who perished (died) while serving in the area of conduct of the anti-terrorist operation, in the case of need of improvement of housing conditions; - provision of shortening terms of considering the issue of granting the status of a combatant to participants of the antiterrorist operation and to ensure strict keeping within such terms; - increase of staff requirements of psychologists of departments of health protection institutions in which participants of the antiterrorist operation undergo rehabilitation, and ensuring, if necessary, in the prescribed order, increase of respective funding of such institutions; - taking measures in respect of introduction of a compulsory medical examination of the state of health of demobilized participants of the antiterrorist operation; - ensuring involvement of specialists of physical rehabilitation in rehabilitation process of participants of the antiterrorist operation and increase of norms of food and medicine costs in hospitals for disabled soldiers per one patient per day; - creation of a single state register of combatants.

7 Special order of local self-government in certain districts of Donetsk and Lugansk regions Law of Ukraine On Amendments to Article 10 of the Law of Ukraine On Special Order of Local Self-Government in Certain Districts of Donetsk and Lugansk Regions of March 17, VIII The changes introducted determine the date of entry into force of certain provisions of the Law of Ukraine On Special Order of Local Self-Government in Certain Districts of Donetsk and Lugansk Regions of 16 September So articles 2-9 of the Law will take effect from the date of acquiring powers by authorities of local self-government in certain districts of Donetsk and Lugansk regions, elected during special election held under the Constitution of Ukraine and other laws of Ukraine with mandatory compliance with the OSCE standards regarding holding democratic elections and the observance of a number of conditions. Namely: participation in monitoring elections of impartial international observers, including those from the Office for Democratic Institutions and Human Rights of the OSCE, the Congress of Local and Regional Authorities of the Council of Europe, other international organizations and foreign countries, as well as other official observers, ensuring safe operating conditions and Lawyer Shchukina@dmp.com.ua unobstructed participation of official observers in the electoral process. Among basic conditions the law also provides for removal of all illegal armed groups, their military equipment, as well as gunmen and mercenaries from the territory of Ukraine and exclusion of unlawful interference in the electoral process, including illegal armed groups. Application of the Verkhovna Rada of Ukraine to the United Nations Organisation, the European Parliament, the Parliamentary Assembly of the Council of Europe, the Parliamentary Assembly of the OSCE on abuse of human rights and freedoms in the Autonomous Republic of Crimea and Sevastopol. Regulation of the Verkhovna Rada of Ukraine On Application of the Verkhovna Rada of Ukraine to the United Nations Organisation, the European Parliament, the Parliamentary Assembly of the Council of Europe, the Parliamentary Assembly of the OSCE on Abuse of Human Rights and Freedoms in the Autonomous Republic of Crimea and Sevastopol of March 17, 2015 No 257-VIII The Verkhovna Rada of Ukraine applied to the United Nations Organization, the European Parliament, the Parliamentary Assembly of the Council of Europe, the Parliamentary Assembly of the OSCE with the appeal to denounce decisively the illegal nature of actions of the Russian occupation authorities and illegal bodies established by them in the temporarily occupied territory of the Autonomous Republic of Crimea and Sevastopol, and also intimidations and harassments of the local population made by them. In addition, the Ukrainian parliamentarians ask to denounce sharply and decisively violation of rights and freedoms of Ukrainians, Crimean tatars and representatives of other nationalities, civil society activists and journalists in the Autonomous Republic of Crimea and Sevastopol. The requirements to provide unobstructed access of leaders of Crimean tatars to the territory of the Autonomous Republic of Crimea and Sevastopol, objective investigation of all cases of violation of human rights and freedoms in this territory, providing observers and representatives of international organizations with unimpeded access to the territory of the Autonomous Republic of Crimea and Sevastopol are among the main requirements set in the application.