LETTER OF THE STATE TAX SERVICE OF UKRAINE

of March 6, 2012 No. 8724/Ya/17-1114

Concerning effects of groundless application of tax social benefit

The State Tax Service of Ukraine, being guided by Art. 52 of the Tax code of Ukraine '...', within the competence and according to regulations of the current legislation reports the following.

Since January 1, 2011 the procedure for the taxation of the income of physical persons is regulated by the Tax code of Ukraine of 02.12.2010 No. 2755 (further - the Code) by which it is determined (subitem 169.2.1 of item 169.2 of the Art. 169) that the tax social benefit is applied to the added taxpayer to monthly salary income (subitem 14.1.48 of item 14.1 of Art. 14 of the Code) only in one place of its charge (payment).

According to subitem 169.2.4 of item 169.2 of Art. 169 of the Section IV of the Tax code of Ukraine of December 2, 2010 No. 2755-VI (further - NKU) if the taxpayer breaks regulations of item 169.2 of Art. 169 of NKU therefore, in particular, the tax social benefit is applied also during receipt of other income within any reporting tax month or in several places of receipt of the income, such taxpayer loses the right to tax social benefit in all places of income acquisition, since month in which such violation took place, and finishing month in which the right to application of tax social benefit renews. The taxpayer can renew the right to application of tax social benefit if he submits the declaration of abandonment of such privilege to all employers with indication of month when there was such violation based on what each employer charges and holds the corresponding amount of underpay of tax and penalty in the amount of 100 percent of the amount of this underpay due to the next payment of the income to such taxpayer and in case the payment amount is insufficient, - due to the following payments. If the amount of underpay and/or penalty were not withheld by the tax agent for the income account of the taxpayer, then such amounts join in the annual tax declaration of such taxpayer. At the same time the right to application of tax social benefit renews since tax month which comes after month in which the amount of such underpay and penalty are completely settled.

At the same time, Article 128 of the Labor code of 10.12.71 (further - the Labour Code) sets restriction concerning the size of payroll contributions. So, according to paragraph 1 of this Article in case of each salary payment the general amount of all assignments cannot exceed twenty percent, and in cases, separately stipulated by the legislation Ukraine, - fifty percent of the salary which is necessary to payment to the worker.

In case of payroll contribution according to several executive documents for the worker in any case fifty percent of earnings shall be kept.

The restrictions set by parts one and the second this Article do not extend to payroll contributions when serving corrective works and in case of collection of the alimony for minor children. In these cases the size of payroll contributions cannot exceed seventy percent.

Thus, in case of application of requirements of subitem 169.2.4 of item 169.2 of Art. 169 of the Code by the taxpayer (employer) such employer shall respect the rules of Art. 128 the Labour Code.

Conditions and procedure for the admission of officials of bodies of the State Tax Service to conducting documentary exit and actual checks are regulated by Art. 81 of the Tax code of Ukraine of 02.12.2010 No. 2755-IV (further - the Code) according to which officials of body of the State Tax Service have the right to start conducting documentary exit check, the actual check in the presence of the bases for their carrying out determined by this Code and on condition of presentation or posylaniye in the cases determined by this Code, such documents:

the direction on conducting such check in which are specified date of issue the name of body of the State Tax Service, details of the order on conducting the corresponding check, the name and details of subject (object) which it is performed (surname, name, middle name of the physical person - the taxpayer who is checked), the purpose, type (planned or unplanned), the bases, start date and duration of check, position and surname of official (office) person who will perform. The direction on check in that case is valid in the presence of the signature of the head of body of the State Tax Service or his deputy which is under seal body of the State Tax Service;

copies of the order on conducting check;

the official ID of persons who are specified in the direction conducting check.

Non-presentation or neposylaniye in the cases determined by this Code, to the taxpayer (to his official (office) persons or persons who actually perform settlement operations) these documents or presentation of the specified documents which are processed with violation of the requirements established by this Item is the basis for not admission of official (office) persons of body of the State Tax Service to conducting documentary exit or actual check.

Refusal of the taxpayer and/or official (office) faces of the taxpayer (his representatives or persons who actually perform settlement operations) from the admission to check on other bases than determined in paragraph five of this Item, are not allowed.

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