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Taras Rozputenko: STSU’s explanation of Tax Code regulations run counter to those regulations

Kyiv. April 6, 2011

On April 1, 2011 Tax Code regulations came into force, among others, those regulating application of profit tax relief. The State Tax Service of Ukraine (STSU) explained them. But the explanations contradict to the Tax Code regulations, believes Taras Rozputenko, an attorney at law with Volkov and Partners Law Firm.
The abovementioned was his comment to the Interfax-Ukraine Agency concerning the regulations coming into force, as well as the STSU’s letter No. 6286/7/16-1517 dated March 4, 2011. Under the letter tax/duty exemption benefit should be applied not to separate taxpayers but to certain transactions, determined in Article 197 of Section V and separate clauses of subsection 2 of Section ХХ of the Tax Code.
"Further, the STSU’s letter presents interesting and illogical conclusion: the taxpayer can either wave a tax relief or stop applying it for one or several tax periods only in case if such tax relief is applied directly to the taxpayer, but it cannot if the tax relief applies to certain goods and services delivery transactions. And it cannot wave lower tax rate as well,” explained Taras Rozputenko.
At the same time, Mr. Rozputenko made an admission that Tax Code reads nothing of conditions making the wave of tax relief impossible. Moreover, a benefit is in essence an advantage, which must be granted to the subjects set out in the law.
In addition, Mr. Rozputenko considers, the ambiguous approach of the STSU’s letter can be applied to the profit taxation matters and other issues regarding tax and duties, confusing business representatives still further.
The lawyer also explained that the STSU’s letters are not binding and likely to be of recommendative or informative nature, aiming to outline the STSU agency’s legal views on a certain issue. “But that is not to say such legal views are necessarily true. One should first carefully read the provisions of laws and bylaws and, afterwards, pay regard to opinions of certain public agencies,” emphasizes Mr. Rozputenko.
The expert, thus, points out that the Tax Code stipulates a tax relief may be used, waived, or suspended.
“If the Tax Service concludes in writing to apply the Tax Code’s provisions in a different way, such conclusion may be surely claimed in the superior tax body or in the court to protect taxpayer’s interests,” summed up Mr. Rozputenko.
Pursuant to clause 30.1 of Article 30 of the Code a tax relief is taxpayer’s immunity from accrual and payment of tax and charges, which is provided by the tax and customs legislation; payment of tax and charges at lower rate provided there arise grounds set out in the Tax Code.
Simultaneously, clause 30.4 of Article 30 of the Code entitles a taxpayer to waive a tax relief or suspend it for one or several periods, unless otherwise prescribed in the Tax Code.
Reportedly, since April 1, 2011 certain provisions of the Tax Code lowering income tax from 25 percent to 23 percent, introducing tax relieves for certain industries and “tax holidays” for enterprises with annual income below UAH 3 mln have become effective. In addition, the whole part ІІІ regulating taxation of corporate profit has come into force as well.
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