IV. Дайте відповіді на питання до тексту:

1. What became the foundation of the United Kingdom’s accounting system?

2. How do the British call their accounting rules?

3. When did the legislative regulation of accounting issues on a national scale begin?

4. How many standards of accounting and reporting are valid in the United Kingdom?

5. When were principal differences between Ukrainian and British financial accounting systems eliminated?

6. Are there any discrepancies between the accounting of Ukraine and the United Kingdom?

7. What is a renewal accounting?

(Total Score – 73 points)

Unit 4. (Total Score – 62 points)

"PATRIOTIC TAX" RATES, PRIVILEGES!; PROCEDURE FOR WITHHOLDING A TAX ON INCOME REPATRIATION IN UKRAINE (Score – 6 points)

Repatriation (Latin repatriation) in translation from Latin literally means "return to homeland". Many people think that this word relates only to individuals, but accountants know, as no one else knows, that the sphere of its application is actually much wider.

While reading the Ukrainian tax legislation you may come across the term "repatriation" in clause 13.2 of Article 3 of the Law on Profit (the Law of Ukraine "On Taxation of Enterprise Profit" revised as the Law of Ukraine of May 22,1997 No. 283/97-BP). To be more exact the matter concerns the repatriation tax.

What does repatriation mean in the context of the said Law? When and according to which procedure is the repatriation tax to be withheld and paid?

REPATRIATION

By this word one can understand that it refers to any payments in favor of a non-resident, from income received by him from carrying out business activities (including payments to the nonresident's bank accounts in Hryvnyas).

A non-resident is a legal and economic entity, but has no legal entity status afffiliate, representative office, etc.) within Ukraine. Its location is outside Ukraine, and such a non-resident is created and carries out its activities in accordance with the other country's legislation, i.e. he/it is that country's resident. If this resident is of a country (hereafter- treaty country) regarding which Ukraine has applied an agreement of double taxation avoidance, then one should understand that the term' non-resident' refers to any legal entity, which exercises its right of a permanent residence, board of management location, place of registration or other analogous criterion, and is liable under the treaty country's legislation to be taxed in this country. Provisions of the international agreement will apply on the condition that a foreign legal entity (non-resident) submits a confirmation note of having a treaty-country resident status to a tax body in Ukraine. This note is to be issued by the competent body of such a country and, as a rule, it is to be made out on official letterhead with the essential elements envisaged. We would like to draw your attention to the following: according to the Ukrainian legislation requirements such confirmation note is to be attested by a notary at the place of its issuance, translated into Ukrainian and legalized by the Ukrainian Consulate. This document may also be attested in the treaty country's embassy and legalized in the Ministry for Foreign Affairs of Ukraine. The documents issued in the countries with which Ukraine entered into international agreements of legal help and relationship is not liable to mandatory legalization.

On August 11,1993 the Convention between the Government of Ukraine and the Government of the United Kingdom of Great Britain and Northern Ireland about liquidation of double taxation and prevention from tax evasion as regards income taxes and increment of real estate value (hereafter— the Convention) came into effect. When applying the provisions of the Convention, the term "the United Kingdom" is understood to refer to Great Britain and Northern Ireland (hereafter- Great Britain). This as well includes any territory outside the territorial sea of Great Britain, which according to international laws is determined or may be determined in future by Great Britain's laws relating to the continental shelf as the territory within which (as regards sea bottom, bowels and their natural resources) the rights of Great Britain may be applied.

It is necessary to note that such definition of the term "the United Kingdom" does not allow ascribing Great Britain's colonies to it. In particular, income taxation of the enterprises registered on the British Virgin Islands is to be carried out without applying the Convention provisions, because such islands reserve state and legal status of a colony. The norms of the Convention do not relate to overseas territories that belong to Great Britain but do not fall within its tax jurisdiction. That is why the companies of Great Britain, which, for example, are registered and/or located on the Jersey Islands and Norman Islands may not as well enjoy the Convention provisions while income taxing either.

The term "Ukraine" means the territory of Ukraine, its continental shelf and its exclusive (sea) economic area.

In accordance with the Convention in Great Britain the functions of the y^ competent body are to be performed by the Inland Revenue or its authorized representative and in Ukraine - by the Minister of Finance of Ukraine or its permanent representative.

REPATRIATION TAX

It is a kind of profit tax and it is withheld when paying income to a non­resident. Presently its rate is 15 per cent of such income amount, unless otherwise provided for by the norms of the international agreements. The Convention between Ukraine and Great Britain about liquidation of double taxation envisages no special rates of the repatriation tax. We would like to note that the responsibility for the repatriation tax withholding and remittance to the budget is to be borne by non-residents and non-residents' permanent representative offices (hereafter - taxpayers) that pay taxes. Prior to a payment order for income remittance to the non-resident, or together with it, these taxpayers are liable to submit to the authorized bank a payment order for remitting the amounts of the repatriation tax withheld to the relevant budget (Article 16 of the Law on Profit). If it is not done the income repatriation to the non-resident will become impossible. Let us explain these notions being guided by the provisions от тhе Law on Profit. According to CL. 1.32 economic activities of a non-resident are any of his activities aimed at income receipt in money, material or non-material forms.

Remember: activity is considered as an economic one only in the case of the non-resident participating in its organization directly. Such participation shall be regular, constant and essential. In the territory of Ukraine the non-resident may carry out economic activities through his permanent representative offices, affiliates, departments, other separated subdivisions, as well as authorized people, agents or any other people acting on his behalf and in his favor.

British companies' profits from commercial activities are to be taxed exclusively in Great Britain unless they carry out such activities via permanent representative offices situated in Ukraine. The profits received by the permanent representative office may be taxed in Ukraine. We'd like to note that the Convention gives no definition of commercial activities. The definition of the term "commercial" we can find in Article 2 of the Law of Ukraine "On International Commercial Arbitration", dated February 24, 1994 No. 4002-XII. This term embraces relations of a trade character and relates to any trade agreements on goods delivery or services rendering, agreements on lease, bank services, underwriting, engineering, investment, cargo and passengers transportation, etc. Therefore, an activity is considered a commercial one when it is connected with the similar agreements performance and directed to making profit (it is very much like the definition of the economic activities given by the Law on Profit). Aiming at the Convention provisions application, the term "permanent representative office" means a permanent place of activity, through which a resident of a treaty country entirely or partially carries out his commercial activities. This includes, in particular, the location of a directorate, office, factory, workshop, natural resources prospecting plant or other facilities, mine, oil or gas well, open-pit or any place of natural resources mining operations.

A construction site or erection project is considered a permanent representative office if it exists more than 12 months. As regards incomes with source of origin in Ukraine, here is where those enumerated in CL. 13.1 of Article 13 of the Law on Profit belong. On our behalf we'd like to add that the most widespread types of incomes, whose payments to a non-resident are to be accompanied by the repatriation tax with holding are:

1. royalty, "engineering" type services;

2. lease (rent) payment made (charged) by residents or permanent representative offices in favor of a non-resident - lesson;

3. fee for carrying out cultural, educational, religious, sport, entertainment activities of non-residents (or people authorized by them) in the territory of Ukraine;

4. fee received from residents or representative offices of other non-residents for brokerage, commission or agent's services tendered by a non-resident or his permanent representative office in the territory of Ukraine in favor of the resident.

Earlier we have already mentioned that while repatriating incomes from Ukraine some international agreements on double taxation avoidance provide for other repatriation tax rates than those existing in Ukraine. In this case the treaty countries’ may enjoy the advantages of the relevant agreement norms in accordance with the established procedure that is exempting from or decreasing taxation income, which has their source of origin from Ukraine according to international agreements on double taxation avoidance confirmed by the resolution of CMU of May 6, 2001, #470.

Words and word combinations (Score – 28 points)

Patriotic tax	патріотичний податок
Rates	ставки
Tax on income repatriation	податок на репатріацію доходів
Affiliate	філіал
Representative office	представництво
An agreement of double taxation avoidance	згода про уникнення подвійного оподаткування
Confirmation note	письмове підтвердження
Tax body	податковий орган
Official letterhead	офіційний бланк
Essential elements envisaged	обов’язкові передбачені реквізити
To be attested by a notary	завіряти нотаріально
Issuance	видача
Consulate	консульство
Mandatory legalization	обов’язкова легалізація
Tax evasion	податкове ухиляння
Increment of real estate value	приріст вартості майна
Bowels	надра
To ascribe	відносити
Legal succession	правоприємництво
Remittance	перерахування
Payment order	платіжне доручення
Via	крізь
Natural resources prospecting plant	установка для розвідки природних ресурсів
Oil or gas well	нафтова або газова свердловина
Open pit	кар’єр
Erection project	монтажний об’єкт
Lessor	лізінгодавець
Exempting	звільняючий