LAW OF UKRAINE

of December 28, 1994 No. 334/94-BP

About the taxation of profit of the companies

Article 1. Determination of terms

In this Law terms are used in the following value:

1.1. Tangible asset - fixed assets and current assets in the any kind different from money, securities, derivatives and intangible assets.

1.2. Intangible asset - objects of intellectual, including industrial property, and also other similar rights recognized according to the procedure, established by the relevant legislation, object of the property right of the taxpayer.

1.3. Money - hryvnia or foreign currency.

1.4. Security - the document certifying right of possession or the relations of loan and meeting the requirements established by the legislation on securities.

1.5. The derivative - the standard document certifying the right and/or the obligation to acquire or sell securities, tangible or intangible assets, and also money on the conditions determined by it in the future. The standard (standard) form of derivatives and procedure for their release and the address are established by the legislation.

Treat derivatives:

1.5.1. The forward contract - the standard document certifying the obligation of person to acquire (to sell) securities, goods or money in certain time and under certain conditions in the future, with fixing of the prices of such sale at the time of the conclusion of such forward contract.

At the same time any party of the forward contract has the right to refuse its accomplishment only in the presence of the consent of other contract party or in the cases determined by the civil legislation.

Claims concerning failure to carry out or inadequate accomplishment of the forward contract can be shown only to the issuer of such forward contract.

The seller of the forward contract cannot report (to sell) the obligation under this contract to other persons without the consent of the buyer of the forward contract.

The buyer of the forward contract has the right without approval of other contract party at any time before expiration (liquidation) of the forward contract to sell such contract to any other person, including the seller of such forward contract.

1.5.2. The futures contract - the standard document certifying the obligation to acquire (to sell) securities, goods or money in certain time and under certain conditions in the future, with fixing of the prices of the moment of accomplishment of obligations by contract parties.

At the same time any party of the futures contract has the right to refuse its accomplishment only in the presence of the consent of other contract party or in the cases determined by the civil legislation.

The buyer of the futures contract has the right to sell such contract during the term of its action to other persons without approval of conditions of such sale of the seller of the contract.

1.5.3. The option - the standard document certifying the right to acquire (to sell) securities (goods, money) under certain conditions in the future, with fixing of the price of the moment of the conclusion of such option or at the time of such acquisition according to the solution of contract parties.

The first option writer (issuer) incurs the unconditional and irrevocable obligation on security sale (goods, money) on the terms of the signed option contract.

Any option buyer has the right to refuse at any time acquisition of such securities (goods, money).

Claims of rather inadequate accomplishment or default on obligations of the option contract can be shown only to the issuer of the option.

The option can be sold without restrictions to other persons during the term of its action.

1.5.4. According to type of values derivatives are subdivided on:

a) the share derivative - the standard document certifying the right to sell and/or purchase security on the caused conditions in the future. Rules of release and the circulation of share derivatives are established by state body to which functions of regulation of the security market are assigned;

b) the currency derivative - the standard document certifying the right to sell and/or purchase currency value on the caused conditions in the future. Rules of release and the circulation of currency derivatives are established by the National Bank of Ukraine;

c) the commodity derivative - the standard document certifying the right to sell and/or purchase exchange goods (except securities) on the caused standard conditions in the future. Rules of release and the circulation of commodity derivatives are established by body to which functions of regulation of the goods stock exchange market are assigned.

1.6. Goods - tangible and intangible assets, and also the securities and derivatives used in any transactions except transactions on their release (issue) and repayment.

1.7. Goodwill - intangible asset which cost is determined as difference between book value of assets of the company and its regular cost as the complete property complex resulting from use of the best managerial qualities, the dominating line item on commodity market (works, services), new technologies, etc.

The goodwill cost is not subject to depreciation and is not considered in determination of gross expenses of the taxpayer.

1.8. Excluded

1.9. The dividend - payment which is made by legal litsomemitent of corporate laws or investment certificates for benefit of the owner of such corporate laws (investment certificates) in connection with distribution of part of profit of such issuer calculated by accounting rules.

Also the payment which is made by the state nekorporatizirovanny, state or utility company for benefit of respectively state or local government body in connection with distribution of part of profit of such company, the payment paid to the certificate holder of fund of real estate transactions as a result of separation of the income of fund of real estate transactions is equated to dividends. At the same time availability or lack of the profit calculated according to rules of tax accounting cannot influence acceptance or rejection of the decision on charge of dividends.

1.10. Percent - the income, the paid (charged) borrower for benefit of creditor in the form of payment for use money raised for certain term or property. Join in percent:

payment for use of money or goods (works, services) received on credit;

payment for use of the money raised in the deposit;

payment for purchase of goods by installments;

payment for use of the property received in use (rent, including leasing and rent transactions).

Percent are charged in the form of percent on principal amount or fixed amounts. In case when attraction of money is performed by sale of the bonds, treasury obligations or savings (deposit) certificates emitted by the borrower, the amount of percent is determined by charge of percent on nominal of such security, payment to the fixed award or prize or by determination of difference between the price of placement and redemption price of such security (the discount amount).

Payments under other civil agreements irrespective of whether they are established in the absolute (fixed) prices or as a percentage to the amount of the agreement or to other cost base, are not percent.

1.11. The credit - money and material values which are provided by residents or nonresidents in use to legal entities or physical persons for certain term and under percent. The credit is subdivided into financial loan, commodity loan, the investment tax credit and the credit under securities which certify the loan relations:

1.11.1. Financial loan - the money provided by the resident bank or the nonresident qualified as bank institution according to the legislation of adoptive state of the nonresident, or the residents and nonresidents having the status of non-bank financial institutions according to the relevant legislation and also the foreign governments or its official agencies or international financial institutions and other nonresident creditors in loan to legal entity or physical person for certain term, for target use and under percent. Rules of provision of financial loans are established by the National Bank of Ukraine (rather bank loans), and also the Cabinet of Ministers of Ukraine (rather non-bank financial organizations) according to the legislation.

1.11.2. Commodity loan - the goods transferred by the resident or the nonresident to the possession to legal entities or physical persons on terms of agreement, the final settlement providing delay for certain term and under percent.

The commodity loan provides transfer of property on goods (results of works, services) to the buyer (customer) at the time of agreement signature or at the time of physical goods receipt (works, services) by such buyer (customer), irrespective of debt repayment time.

1.11.3. The credit under the securities certifying the loan relations:

the money raised by legal person debtor (debtor) from other legal entities or physical persons as compensation of cost of the issued (emitted) such debtor bonds or deposit certificates. Rules of issue (release), sale and repayment (redemption) of the specified securities, and also requirements to their issuers are established by the relevant legislation.

1.11.4. The investment tax credit is the delay of payment of the income tax granted to the subject of business activity for certain term for the purpose of increase in its financial resources for implementation of innovative programs with subsequent compensation of the delayed amounts in the form of additional receipts of tax by general profit increase which will be received as a result of implementation of innovative programs.

1.12. Tally trade - the economic activity providing sale by the resident or nonresident of goods to physical persons or legal entities on the terms of payment by installments of final settlement for certain term and under percent.

Tally trade provides transfer of goods to the order of the buyer at the time of implementation of the first fee (deposit) with transfer of property on such goods after final settlement.

Rules of tally trade to the physical persons which are not payers of this tax are established by the Cabinet of Ministers of Ukraine.

1.13. The deposit (contribution) - (cash) means provided by physical persons or legal entities in management to the resident determined by the financial organization according to the legislation of Ukraine or the nonresident for term and under percent. Attraction of deposits can be performed in the form of release (issue) of savings (deposit) certificates. Rules of implementation of deposit transactions are established: for bank deposits - the National Bank of Ukraine according to the legislation; for deposits (fees) in other financial institutions - the state body determined by the law.

Sums of earnest money, brought as providing contractual commitments of one agreement party before another do not belong to deposits.

1.14. Lombard transaction - transaction of physical persons or legal entities on receipt of money from the legal entity qualified as financial institution according to the legislation of Ukraine, on the security of goods or currency values. Lombard transactions are kind of the credit on the security.

1.15. Residents - the legal entities and business entities of Ukraine which do not have the status of the legal entity (branches, representations, etc.) created and performing the activities according to the legislation of Ukraine with the location in its territory.

The diplomatic representations, consular establishments and other official representations of Ukraine abroad having diplomatic privileges and immunity, and also branches and representative offices of the companies and the organizations of Ukraine abroad which are not performing economic activity.

1.16. Nonresidents - the legal entities and business entities which do not have the status of the legal entity (branches, representations, etc.) with the location outside Ukraine created and performing the activities according to the legislation of other state.

The diplomatic representations located in the territory of Ukraine, consular establishments and other official representations of foreign states, the international organizations and their representations having diplomatic privileges and immunity, and also representative offices of other foreign organizations and firms which are not performing economic activity according to the legislation of Ukraine.

1.17. Permanent mission of the nonresident in Ukraine (daleepostoyanny representation) - the permanent place of activities through which economic activity of the nonresident in the territory of Ukraine is fully or partially performed. In particular, treat permanent missions: management place, branch, office, plant, factory, workshop, mine, oil or gas well, pit or other place of investigation or mining. For the purpose of the taxation the residents having powers are equated to permanent missions to act on behalf of the nonresident that attracts origin at the nonresident of the civil laws and obligations (to sign agreements (contracts) on behalf of the nonresident; contain (to store) inventories of the goods belonging to the nonresident from which warehouse delivery of goods on behalf of the nonresident, except the residents having the status of warehouse of customs is performed). The residents which for the purpose of the taxation are equated to permanent missions are not subject to additional registration in tax authorities as taxpayers.

1.18. Leasing (rent) transaction - the economic activity (except transactions on chartering (charter) of ocean ships and other vehicles) the physical or legal entity (lessor) providing fixed assets or the earth in use to other physical or legal entities (lessees) for the rent and for certain term. Transactions on leasing (lease) of complete property complexes of the state companies are regulated by the relevant legislation.

Leasing (rent) transactions are performed in the form of operational leasing (lease), financial leasing (lease), returnable leasing (lease), lease of land and lease of premises.

1.18.1. Operational leasing (lease) - the economic activity of physical person or legal entity providing according to the agreement of the operational leasing (lease) transfer to the property tenant falling under determination of fixed assets according to article 8 of this Law acquired or made by the lessor on other conditions than are provided by financial leasing (lease).

1.18.2. Financial leasing (lease) - the economic activity of physical person or legal entity providing according to the agreement of the financial leasing (lease) transfer to the property tenant falling under determination of fixed assets according to article 8 of this Law acquired or made by the lessor and also all risks and remunerations connected with right to use and ownerships of object of leasing.

Leasing (lease) is considered financial if the leasing (rent) agreement contains one of the following conditions:

object of leasing is transferred to the term during which at least 75 percent of its original cost on the depreciation rates determined by article 8 of this Law will be amortized, and the lessee shall acquire object of leasing in property during effective period of the leasing agreement or at the time of its termination at the price determined in such leasing agreement;

the amount of leasing (rent) payments from lease term commencement is equal or exceeds original cost of object of leasing;

if object which was in structure of fixed assets of the lessor during the term of the first 50 percent of depreciation of its original cost is leased, the total amount of leasing payments shall equal or be more than 90 percent of the regular price of such object of leasing operating for the beginning of effective period of the leasing agreement, increased by the amount of the percent calculated proceeding from the discount rate of the National Bank of Ukraine determined on effective date of the leasing contract for all its term;

the property which is transferred to financial leasing is made by request of the leasing recipient (lessee) and after the end of operation of the leasing agreement cannot be used by other persons, except the leasing recipient (lessee), proceeding from its technical and quality characteristics.

For the purposes of this subitem the term "term of financial leasing" is understood as term of date of cession of property to the leasing recipient (lessee) before date of acquisition of property right to such property or implementation of the last leasing payment by the leasing recipient, depending on what event took place earlier.

Irrespective of whether leasing transaction belongs to financial leasing according to regulations of this subitem or not, agreement parties can determine in case of the conclusion of the agreement such transaction as operational leasing without the right of subsequent change of the status of such transaction before the expiration of operation of the relevant agreement.

1.18.3. Returnable leasing (lease) - the economic activity of the physical or legal entity providing sale of fixed assets of the financial organization with simultaneous return receipt of such fixed assets by such physical person or legal entity in operational or financial leasing.

1.18.4. Lease of land - the economic activity providing the lessor of the earth in use to other legal entity or physical person for certain term on purpose and for the rent. The procedure of lease of land is established by the relevant legislation.

1.18.5. Lease of premises - the economic activity providing the apartment house or the apartment its owner in use to other physical person or legal entity for certain term for target use and for the rent.

The maximum amount of the rent paid by physical persons for lease 'premises for its use as the permanent residence is subject to regulation according to the procedure, determined by the Cabinet of Ministers of Ukraine.

The size of the rent paid by physical persons for lease of premises for its use in other purposes than the permanent residence, and also size of the rent paid by legal entities, are not subject to regulation.

The procedure of transactions on lease of premises is established by the Cabinet of Ministers of Ukraine according to provisions of the Housing code of Ukraine.

Leasing (lease) of other constructions and structures is performed on the conditions defined by agreements of leasing (lease).

1.19. Barter (commodity exchange) - the economic activity providing carrying out calculations for .tovara (work, service) in any other form, than cash, including any kinds of offsetting and repayment of reciprocal debt as a result of which transfer of funds for accounts of the seller for compensation of cost of such goods is not provided (works, services).

1.20. Regular price

1.20.1. If this Item does not establish other, the price of goods (works, services) determined by agreement parties is considered regular. If the return is not proved, it is considered that such regular price answers the level of fair market prices.

Fair market price is the price at which goods (works, services) are transferred to other owner provided that the seller wishes to report such goods (works, services), and the buyer wishes to receive them in the absence of any coercion, both parties are mutually independent legally and actually, the prices which developed in the market identical (possess sufficient information about such goods (works, services), and also and in case of their absence - homogeneous) goods (works, services).

Commodity market (works, services) - the sphere of turnover of goods (works, services) which is determined proceeding from possibility of the buyer (seller) really and without significant additional expenses to acquire (to sell) goods (work, service) on the either party of the agreement of the territory next relatively.

Identical goods (works, services) - goods (works, services), the main signs, having identical characteristic of them. In case of determination of identity of goods their physical characteristics which are not influencing their quality characteristics and not having essential value for determination of signs of goods, quality and reputation in the market, country of source and the producer are taken into account, in particular. Insignificant differences in their appearance can not be considered.

Homogeneous goods (works, services) - goods (works, services) which are not identical, have similar characteristics and consist of similar components that allows them to perform identical functions and (or) to be interchangeable. In case of determination of uniformity of goods (works, services) their quality, trademark availability, reputation in the market, country of source and the producer are taken into account, in particular.

1.20.2. For determination of the regular price of goods (works, services) information on prisoners at the time of sale of such goods (work, service) agreements on identical (homogeneous) goods (works, services) in comparable conditions is used. In particular, such conditions of agreements as quantity (amount) of goods (for example, consignment amount), terms of accomplishment of obligations, conditions of payments, regular for such transaction, and also other objective conditions which can influence the price are considered. At the same time conditions of agreements in the market identical (in case of their absence - homogeneous) goods (works, services) are recognized comparable if difference between such conditions significantly does not influence the price, or can be economically proved. At the same time are considered regular in case of the conclusion of agreements between untied persons of the allowance or discount to the price. In particular, but it is not exclusive, the discounts connected with seasonal and other fluctuations of the consumer demand on goods (works, services), by loss by goods of quality or other properties are considered; expiration (approach of date of the expiration) of storage duration (suitability, realization); sale of illiquid or low-liquid goods; marketing policy, including in case of promotion of goods (works, services) on the markets; provision of pilot models and samples of goods for the purpose of acquaintance of consumers with them.

If goods (works, services), are identical (in case of their otsutstviiodnorodny) to goods (works, services) concerning which the regular price is determined, are publicly offered in sale, or have the prices established in the organized market of securities or have the exchange price (stock exchange quotation), determination of the regular price in the established in paragraph one of this subitem procedure is performed taking into account such factors.

1.20.3. For goods (works, services) which are on sale by the public announcement of conditions of their sale the price containing in such public announcement is recognized regular.

1.20.4. If goods (works, services) are on sale with use of tender, auction, the exchange offer or offer in the organized market of securities or when sale (alienation) of goods is performed forcibly according to the legislation, the price received in case of such sale is regular.

1.20.5. If goods prices (works, services) are subject to state regulation according to the legislation, the price established according to the principles of such regulation is considered regular. This rule does not extend to establishment of the minimum selling price - in this case fair market price is regular.

1.20.5-1. If the regular price cannot be determined with use of regulations of the previous subitems of this Item, then the rules determined by national provisions (standards) of financial accounting, and also national standards concerning assessment of property and property rights are applied to proofs of reasons for its level. For the purpose of the taxation the terms "fair value", "market value" and "net value of realization" used in national provisions (standards) of financial accounting and national standards concerning assessment of property and to property rights are equated to the term "regular price" determined by this Law.

1.20.5-2. The central executive body on regulation of the markets of financial services establishes technique of determination of the regular price of insurance rate.

1.20.6. If on the corresponding commodity market (works, services) transactions with identical (are not performed in case of their otsutstviiodnorodny) goods (works, services) or if it is impossible to determine their price in view of absence or unavailability of the relevant information, the agreement price is considered the regular price.

1.20.7. Regular interest rate for the deposit - interest rate which is established depending on terms and the size of the deposit according to the decision of the taxpayer which shall be promulgated and establish identical rules according to the conclusion of the deposit contract with any categories of persons taking into account the restrictions established by the law. The procedure for promulgation of information on conditions of the conclusion of the deposit agreement is determined for bank institutions by the National Bank of Ukraine, for non-bank financial institutions - the state body determined by the law. Sums of earnest money, brought as providing contractual commitments with one agreement party before another do not belong to deposits.

1.20.8. The obligation of proof that the price of the agreement does not correspond to the level of the regular price in the cases determined by this Law is assigned to tax authority according to the procedure, established by the law. When conducting check of the taxpayer the tax authority has the right to make request, and the taxpayer shall prove the level of contract prices or refer to regulations of paragraph one of subitem 1.20.1 of this Item.

1.20.9. In addition to the rules of determination of the regular price established by this Item, the Cabinet of Ministers of Ukraine has the right to establish methodology of determination of the regular price of goods (works, services) which are on sale (are provided) by the taxpayers determined as natural monopolists according to the law, proceeding from the following rules:

a) if it is impossible to determine the price of goods (works, services) in view of absence or unavailability of the relevant information, for determination of the regular price the resale price method (the following sale) of such goods (works, services) is used. At the same time the price of goods (works, services) which are on sale the taxpayer is determined at the level of the price at which such goods (works, services) are resold by their buyer in case of the following sale, taking into account the regular prices of the actual expenses incurred by this buyer in case of sale and promotion for the market of these goods (works, services) determined by means of application and also profit of the buyer, regular for this type of activity (without the price at which the buyer acquired at the seller goods);

b) in case of impossibility of use of method of resale price of goods (works, services) the "expenses plus" method is used (account) on which the price of goods (works, services) which are on sale the taxpayer, is determined as the amount of the actual (incurred) expenses and profit, regular for this type of activity. At the same time the expenses on production (acquisition) and (or) sales of goods, their transportation, storage, insurance or other similar expenses determined using the regular prices are considered.

1.20.10. Additional accrual of the tax liabilities of the taxpayer by tax authority owing to determination of the regular prices is performed according to the procedure established by the law for charge of the tax liabilities by indirect methods, and for the taxpayers recognized by natural monopolists according to the law, - also according to the principles of price regulation, established by such law.

The tax authority has the right to apply the regular prices to determination of taxation basis in the cases provided by the law irrespective of type of the economic activity performed by the payer of this tax, or the tax status of other party of such transaction.

Disclaimer! This text was translated by AI translator and is not a valid juridical document. No warranty. No claim. More info