Taxation ukrainian taxation system Key Words and Phrases:

compulsory/mandatory		обов’язковий
to charge/to levy		стягувати
taxpayer		платник податку
turnover		обіг
fiscal policy		фіскальна політика
income tax		прибутковий податок з фізичних осіб
real estate		нерухоме майно
excise (tax)		акциз, акцизний податок
fee		плата, збір
value-added tax (VAT)		податок на додану вартість (ПДВ)
tax rate		ставка податку
national tax		загальнодержавний податок
local tax		місцевий податок
single tax		єдиний податок
rent		рентна плата
tax liability		податковий обов'язок
tax return		податкова декларація
vehicle		транспортний засіб
pipeline		трубопровід
horticulture		садівництво
hop production		хмелярство
special-purpose surcharge		цільова надбавка
environmental tax		екологічний податок
tax allowance		податкові пільги
customs duty		мито, збір
to stipulate		зумовлювати
(tax) rate		податкова ставка
social justice		соціальна справедливість
unavoidability		невідворотність
fiscal sufficiency		фіскальна достатність
economic sustainability		економічність (оподаткування)
uniformity		рівномірність
unified approach		єдиний підхід
impose penalty		накладати стягнення, штраф
cornerstone		наріжний камінь

Taxation refers to the act of a taxing authority actually levying tax. The purpose of taxation is to finance government expenditure. Taxes are compulsory payments charged from businesses and individuals to the budget. In Ukraine tax (fee, payment, duty) is a mandatory payment to a relevant budget that is levied from a payer.

Fiscal policy means government efforts to keep the economy stable.

The base for tax allowances and procedures of their application may be defined together with taxes. Ukrainian tax legislation consists of the Constitution of Ukraine, the Tax Code, the Customs Code, and other Customs Acts relating to export and import taxes. The Tax Code regulates relationships in paying of taxes and duties. Any taxation issues are regulated by Tax Code. The Tax Code consolidated many Ukrainian tax laws into one document in order to simplify and update the taxation system of Ukraine.

The Ukrainian tax legislation is based on the following principles:

universal taxation;

• equal treatment of all taxpayers by the law, exclusion of all kinds of tax discrimination;

• unavoidability of legally established liability for violating the tax legislation;

• presumption of the legitimacy of decisions of a taxpayer;

• fiscal sufficiency – setting taxes and fees with the view of balancing budget of revenues and expenditures;

• social justice – setting taxes and fees in accordance with actual solvency of the taxpayer;

• economic sustainability – taxes and fees should be significantly higher than costs of their administration;

• neutrality of taxation – setting taxes and fees in a manner that doesn‘t influence the increase or decrease of taxpayer competitiveness;

• stability;

• convenience and uniformity of payments;

• unified approach toward setting taxes and levies is the comprehensive legal definition of all elements of the tax.

The Ukrainian taxation system includes national taxes and local taxes and fees.

National taxes and fees are payments with the same mechanism of performance all over the territory of Ukraine (that is single dates of payment and tax rates). National taxes and fees include the following:

• corporate income tax;

• personal income tax;

• value added tax (VAT);

• excise;

• the first registration vehicle tax;

• environmental tax;

• rent for transportation of oil and petroleum products through the main pipelines and oil-products pipeline, rent for transit of natural gas and ammonia through the territory of Ukraine;

• rent for oil, natural gas and gas condensate produced in Ukraine;

• tax for use of subsoil natural resources;

• land tax;

• fee for use of radio frequencies;

• fee for special use of water;

• fee for special use of forests;

• fixed agricultural tax;

• fee for development of horticulture, grape production and hop production;

• customs duty;

• fee in the form of the special-purpose surcharge to the applicable electrical and thermal energy tariff rate, except for the energy generated with qualified co-generation plants;

• fee in the form of the special purpose surcharge to the applicable natural gas tariff rate for consumers of all ownership forms.

Customs duty is regulated by the Customs Code, if the Tax Code does not stipulate otherwise. National taxes and fees are collected to the state and local budgets of Ukraine in accordance with the Budget Code of Ukraine. Local taxes and fees are mandatory for payment on the territories of respective communities.

Local taxes include:

• tax on a real estate that is other than a plot of land;

• single tax.

Local fees include:

• fees for certain types of business activities;

• parking fee;

• tourism fee.

The following elements should be necessarily defined for taxation:

• taxpayer;

• object of taxation;

• taxation base;

• rate of taxation;

• procedures for tax calculation;

• tax period;

• term and procedure of tax payment;

• terms and procedures for reporting on tax accounting and tax payment.

Taxpayers in Ukraine are individuals (residents and non-residents of Ukraine), legal entities (residents and non-residents of Ukraine) and their affiliated branches, who possess, receive (transfer) objects of taxation or undertake activity (operations) subject to taxation in keeping with Tax Code or tax laws, and who are liable to pay taxes and fees in keeping with Tax Code.

The object of taxation may be property, goods, income (profit) or portions thereof, turnover of goods (works, services), operations with the supply of goods (works, services) and other objects specified by the tax laws, the availability of which is related to the emergence of taxpayer’s liabilities in keeping with tax legislation. The source of tax payments is the taxpayer’s income.

Tax base is a physical, valuable or other characteristic design of the taxation object, which is used to determine tax liability and to which tax rate is applied.

In most countries, people can earn a certain amount of income free of tax. That is known as their personal tax allowance. The size of allowance will usually vary according to the person’s circumstances. Many features of taxation are the same in many countries.

The tax period is time period established by Tax Code for calculation and payment of certain taxes and fees. The period of tax payment and collection is accrued in annual, quarterly, monthly, decade, weekly and daily terms. Tax payment and collection period are established by the tax legislation for each tax separately.

There are some types of the tax period:

• calendar year;

• calendar qurter;

• calendar month;

• calendar day.

Tax liability means taxpayer’s liability to calculate, declare and/or pay sums of tax and fee under the order and within the time line specified in Tax Code and customs legislation.

Every business tries to minimize its taxes, so tax accounting has developed into one of the most important branches of accounting throughout the world. On the other hand, tax computation is under strict scrutiny of supervisory authorities. In Ukraine the supervision by taxation is performed by tax authorities and customs authorities/. A taxpayer presents to the tax authorities a tax return, the form which details his/her/their income, expenses, exemptions, deductions, and calculation of taxes. The tax authorities may carry out scheduled audits a maximum of once each year. In addition, the tax authorities may perform out-of-schedule audits. If during an audit the tax authorities determine that the tax liability shown in the taxpayer's return is understated, they will impose penalties. If a taxpayer is convicted of tax evasion a penalty is also imposed. When tax is not paid on time, interest for late payment is charged on a daily basis in addition to the above penalties.

The Ukrainian Parliament and Government have accomplished significant developments in the taxation system. Tax reform is likely to encourage new investors. A clear and friendly tax environment is the cornerstone upon which the investment climate in Ukraine will flourish to its full potential.

NOTE:

The VAT (value-added tax) is an indirect tax charged at each stage of production as a percentage of the value added at that stage. The higher the value of the good is, the higher the VAT paid. VAT was initially introduced in Ukraine in 1992 and until 1997 it functioned as a form of turnover tax. In 1997 the VAT law completely reformed emulating the main principles under which this tax operates in the European Union. Ukraine has a relatively high VAT rate (20%).

Excise tax is an indirect tax on the consumption of certain commodities, which is included into the price of such commodities (products).

Tax rate is the amount of tax accruals per (from) unit of measurement of tax base.

QUESTIONS:

1. What is taxation?

2. What is the purpose of taxation?

3. What are taxes?

4. What does the fiscal policy mean?

5. What does the Ukrainian tax legislation consists of?

6. What principles is the taxation legislation of Ukraine based on?

7. What do national taxes include?

8. What do local taxes and fees include?

9. What do taxpayers in Ukraine include?

10. What is the object of taxation?

11. What is the source of tax payments?

12. What is tax base?

13. What is tax allowance?

14. What is tax period?

15. What types of tax period are there?

16. What does tax liability mean?

17. What is tax return?

18. Why has tax accounting developed into one of the most important branches of accounting throughout the world?

19. Tax computation is under strict scrutiny of tax authorities, isn’t it?

20. What is the role of tax authorities?