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Lawyer: Restrictions for legal entities cooperating with “flat tax”-entrepreneurs not apply to IT expenses


Interfax-Ukraine
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 Code.
“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 field.
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.

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