Lawyer: Restrictions for legal entities cooperating with “flat tax”-entrepreneurs not apply to IT expenses
Kyiv. 1 April, 2011
Legal entities that purchase goods and services from private
entrepreneurs benefiting from the flat tax will no longer be able to
account such payments as gross expenses. In other words, these payments
will be subject to corporate profit tax. This rule is introduced by the
new Tax Code and becomes effective from April 1, 2011. Alongside, it
does not applied to expenses related to information technologies (IT),
commented Attorney-at-law with Volkov and Partners Taras Rozputenko
to Interfax-Ukraine on certain provisions stipulating, inter alia, the
aforesaid restrictions and introduced from April 1 within the new Tax
“It is obvious that IT businesses today are much luckier than many others,” added Mr. Rozputenko.
The Attorney-at-law explained that such restrictions do not apply to
enterprises if goods, services and works purchased from private
entrepreneurs benefiting from the flat tax relate to informatization
He also pointed out that the term “informatization” and those notions
relative to it are interpreted by the Law “On National Informatization
Program” and р. 72 “Activity in Informatization Field” of the National
Classifier of Ukraine “Classification of Types of Economic Activity".
Reportedly, Chapter III of the new Tax Code dealing with the corporate
profit tax became effective on April 1, 2011. It exactly prohibits legal
entities to account purchases of goods and services from private
entrepreneurs benefiting from the flat tax as gross expenses, i.e. they
being chargeable with corporate profit tax.
In addition, since April 1, 2011 the legal instrument has introduced tax
relieves for certain industries and “tax holidays” for enterprises with
annual income below UAH 3 mln.
The Tax Code came into force from January 1, 2011.
At the same time, unless relevant amendments to the Tax Code concerning
system’s simplicity are introduced, the President’s Decree “On
Simplified System of Taxation, Accounting and Reporting of Small
Businesses” No. 727/98 of July 3, 1998 continues to have effect.