ORDER OF STATE TAX ADMINISTRATION OF UKRAINE

of July 31, 1997 No. 274

About approval of the Procedure for creation of calculation of the income tax of the nonresident who carries out activities in the territory of Ukraine through permanent mission

According to Item 16.11 of article 16 of the Law of Ukraine "About the taxation of profit of the companies, being guided by article 8 of the Law of Ukraine "About the State Tax Service in Ukraine, I ORDER:

1. Approve the Procedure for creation of calculation of the income tax of the nonresident who is carrying out activities in the territory of Ukraine through permanent mission which is applied.

2. To the deputy head of department of international backgrounds Gladun Yu. V. provide this order to the Ministry of Justice of Ukraine for state registration.

3. To the head of department in five-day time after state registration of the order to provide with Kovalenko V. V. cases its replication and mailing to State Tax Administrations in the Autonomous Republic of Crimea, areas, the cities of Kiev and Sevastopol.

4. To the chief of Head department on work with taxpayers Semenenko V. V. and Editor-in-chief of the magazine "Visnik podatkovo? to service" to Kulik Yu. M. bring this order through mass media to the attention of taxpayers.

Approved by the order of State Tax Administration of Ukraine of July 31, 1997, No. 274

Procedure for creation of calculation of the income tax of the nonresident who carries out activities in the territory of Ukraine through permanent mission

1. General provisions

1.1. Procedure for creation of calculation of the income tax of the nonresident who carries out activities in the territory of Ukraine through permanent mission (further - the Procedure), developed according to Item 16.11 of article 16 of the Law of Ukraine "About the taxation of profit of the companies" (further - the Law).

1.2. This Procedure is applied by permanent missions of nonresidents in Ukraine which are determined in Item 1.17 of article 1 of the Law and are subject to registration according to Regulations on order of registration and accounting of permanent missions of nonresidents in Ukraine as income tax payers, and also residents of Ukraine, priravnyanny for the purpose of the taxation to permanent missions (further - taxpayers).

1.3. Taxpayers keep financial accounting and the reporting according to the legislation of Ukraine, quarterly submit to the state tax authority on the location the declaration about profit of the company for the form approved by State Tax Administration of Ukraine.

Tax statements can be provided to tax authority according to the voluntary decision of the taxpayer electronically on condition of observance of the current legislation regulating these questions.

1.4. The taxpayer independently determines the profit got by the nonresident from the economic activity performed through permanent mission. For the purposes of this Procedure and according to determinations of the Law the economic activity of the nonresident performed through permanent mission is the any activities of permanent mission directed to receipt by the nonresident of the income in cash, material or non-material forms. In particular, activities of permanent mission consist in production of goods (provision of services, implementation of works) which are subject to sale under contracts, concluded by the nonresident, or are used by the nonresident in the course of its economic activity.

1.5. For the purpose of the taxation the permanent mission is equated to the taxpayer who performs the activities irrespective of such nonresident. Taking into account it, the profit which the permanent mission would get from conducting the activities irrespective of the nonresident is profit what nonresident receives from the economic activity performed through permanent mission. In case activities of permanent mission consist only on provision of services directly to the nonresident, taxable profit is the profit which the permanent mission could receive if it provided the same services as the independent company.

1.6. The taxable profit determination is carried out in general procedure taking into account the following. The permanent mission records results of the activities in natural measurements and in the generalized monetary value by the continuous, documentary and interconnected their display. Documentary display of results of activities of permanent mission is carried out according to requirements of the Regulations on documentary ensuring records in financial accounting based on source documents approved by the order of the Ministry of Finance of Ukraine of May 24, 1995 N 88 and registered in the Ministry of Justice of Ukraine on June 5, 1995 for N 168/704. Source documents are written certificates which confirm economic activities, including orders and powers of attorney of administration (owner) on their carrying out. The nonresident acts as the owner of permanent mission. The copy of activities reports which is carried out by permanent mission which go to the nonresident are also source documents. Account is kept irrespective of whether there is sales of goods (works, services) full or partial implementation of obligations of the nonresident under the contracts signed by it and whether reward for the realized goods (works, services) directly permanent mission or the nonresident is earned.

1.7. The permanent mission records the activities in such units of natural measurement which provide comparison of the different amounts and quantity of the homogeneous goods, works and services made performed and provided by permanent mission in the corresponding tax period. Use of exclusively cost accounting units of results of activities of permanent mission is allowed only in case such units are used for determination of remuneration for activities which are carried out by permanent mission.

Example:

In Ukraine the permanent mission of the company A which makes and performs deliveries of the computer equipment to consumers to Ukraine works. Delivery contracts of the equipment provide that on site deliveries at the customer are carried out adjustment and establishment of the equipment, and also its guarantee maintenance. As for implementation of works concerning establishment adjustment of the equipment the personnel of permanent mission are used, these activities are activities of directly permanent mission. As for the specified work types the permanent mission determines the income which it would gain if it was effective irrespective of the nonresident, and records the activities.

The specification to contracts specifies only working costs concerning establishment, adjustment and guarantee maintenance of unit of the computer equipment. If the cost of the specified works per unit of the computer equipment does not change depending on cost and modification of the equipment, then account of activities of permanent mission can be kept in terms of the established equipment. If the cost of services concerning establishment and adjustment of the equipment is determined as percent from the cost of the equipment, then the permanent mission shall keep also account of cost of the delivered equipment. In other case the permanent mission records the man-hours spent for services concerning establishment and adjustment.

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