Human Capital News. Newsletter

Transcription

1 January 2015 Newsletter Human Capital News Contacts at EY: Olga Gorbanovskaya Tel: +380 (44) Halyna Khomenko Tel: +380 (44) Oksana Lapii Tel: +380 (44) In the last days of 2014 the Parliament of Ukraine, within the framework of tax reform, adopted a legislative package that significantly changes the order and rates of personal income taxation and payment of Unified Social Tax (hereinafter the UST). We will briefly analyze the major changes relating to personal income taxation in Marginal personal income tax rate from employment is increased According to Law # 71-VIII, 1 salary of private individuals, as well as remuneration for civil contracts in amounts that do not exceed 10 times the minimum wage (currently - UAH ), will be taxed at 15% (as before). The increased rate of 20% (not 17%, as before) will apply to the exceeding amount. Passive personal income tax rate is increased Law # 71-VIII increased the tax rate on passive personal income from 15% to 20%. In particular, the following types of passive income are subject to 20% taxation: interest (including bank deposits); investment income; royalty; 1 The Law of Ukraine "On amendments to the Tax Code of Ukraine and several legislative acts of Ukraine regarding tax reform # 71-VIII dated 28 December 2014.

2 Human Capital News 2 dividends from non-resident companies and collective investment institutions. Dividends an individual receives from a resident company are taxed at 5%. Taxable pension limit is reduced Law # 71-VIII has reduced the size of a pension subject to taxation from a monthly UAH 10,000 to 3 minimum wages (currently UAH 3,654). Anything in excess of that figure is taxable. As long as no specific norm with respect to pension taxation is envisaged, the general tax rates will be applied. The marginal tax rate on real estate property other than land plots is increased and exemptions for such tax payment are reduced Law # 71-VIII increases the marginal tax rate on real estate property other than land plots from 1% to 2% of the minimum wage per square meter (currently it is USD per square meter). Furthermore, the Law # 71-VIII reduces exemptions provided to individuals real estate property tax payers. In particular, the tax base for residential property owned by an individual - taxpayer is reduced: for apartment/apartments regardless of their number - to 60 m2 (previously 120 m2); for residential house/houses regardless of their number to 120 m2 (previously 250 m2); for various types of residential property, including their shares (in case of simultaneous possession by the taxpayer of an apartment/apartments and a residential house/houses, including their parts) - to 180 m 2 (previously 370 m 2 ). At the same time, the local authorities reserve the right to set the tax rate within the legally stipulated norm as well as to increase the tax exemption. Thus, for example, if an individual owns an apartment with a total area of 100 m 2, 40 m 2 will be subject to taxation at a maximum tax rate UAH per 1 m2, so that the maximum amount of the tax may be UAH Real estate property tax other than the land plot tax is payable once a year. Above-mentioned rules for taxation of real estate property will apply in 2016 to the real estate owned by the individuals in 2015.

3 Human Capital News 3 New tax for automobile owners is introduced Law # 71-VIII has introduced a new tax for owners of motorcars with engine capacity over 3,000 cm3 and which have been used for less than 5 years. This tax is to be paid in The tax rate is UAH 25,000 per year for each car that meets the above criteria. Military levy is extended As we reported earlier, on 3 August 2014 a military levy of 1.5% was introduced on Ukrainian wages and on similar compensation, as well as on lottery and gambling prizes. This levy was expected to be valid until 1 January However, given the current situation in the country, Law # 71-VIII has extended the levy to the unlimited period. In addition, the base for the military levy has been extended. Currently the military levy is imposed on any personal income (including foreign income). Changes to the simplified tax system Law # 71-VIII introduced certain amendments to the simplified system of taxation. In particular, it reduced the number of single tax payer groups from six to four, modified the criteria for each group distribution and established the obligation to use registrars of payment transactions (hereinafter - RPT) for certain groups. Thus, after the amendments, the distribution of the single tax payers will be as follows: 1 group private individuals entrepreneurs who do not use hired labor, who perform exclusively retail trade of goods on the market and/or who conduct economic activities to provide consumer services and whose annual income does not exceed USD 300,000 (previously 150,000 USD); 2 group private individuals - entrepreneurs who perform economic activities to provide services, including domestic services, to single tax payers and / or consumers, production and / or sale of goods, or activity in the restaurant industry, provided that during a calendar year they meet the following criteria: (1) the number of simultaneously employed persons does not exceed 10; (2) income does not exceed UAH 1,500,000 (UAH 1,000,000 previously); 3 group private individuals entrepreneurs, who have no limitations of the number of employed persons and legal entities, whose annual income does not exceed UAH 20,000,000 (UAH 30,000,000 previously);

4 Human Capital News 4 4 group - agricultural producers whose share of agricultural commodity production in the previous tax (reporting) year equals or exceeds 75%. Law # 71-VIII stipulates that single tax payers of the third - sixth groups registered by the regulatory authorities before 1 January 2015, effectively 1 January 2015 are considered as 3 group single tax payers according to Chapter 1 of Section XIV of the Code. Thus, such taxpayers are not to re-register. Law # 71-VIII establishes the following single tax rates: 1 group up to 10% of the minimum wage (previously from 1% to 10%); 2 group up to 20% of the minimum wage (previously from 2% to 20%); 3 group - a) 2% of income provided VAT is being paid; b) 4% of income if VAT is included in the single tax (previously from 3% to 5%); 4 group the tax rates per hectare of agricultural land and/or water fund land depend on the category (type) of land and its location and range from 0.09% to 3% of the tax base. Law # 71-VIII also obliges single taxpayers of the 2 and 3 groups to use RPT (with some exceptions). Single taxpayers of the 1 group are not to use it. According to the Law, taxpayers of the 3 group should start using the RPT on 1 July 2015, and those of the 2 group should start using it on 1 January *** If you have any questions about this newsletter or would like to discuss your personal situation and how the new rules will affect you, please give us a call or send us an and we will gladly consider your questions online.

5 Human Capital News 5 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,800 professionals work at 21 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, Yerevan, and Minsk). EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. Contacts Kyiv +380 (44) Ernst & Young LLC All Rights Reserved.