LAW OF UKRAINE

of May 22, 2003 No. 889-IV

About tax on the income of physical persons

Article 1. Determination of terms

In this Law terms are used in the following value:

1.1. The additional benefits - the money, material or non-material values, services, other income types paid (provided) to the taxpayer his employer (self-employed person) if such income is not the salary or payment, compensation or compensation according to the civil bargains concluded with such taxpayer (further - other payments and remunerations).

Payment (provision) to the taxpayer of the additional benefits by the third party from name and/or at the request of the employer (self-employed person) is at his expense equated to provision of such additional benefits by such employer (self-employed person).

For the purposes of this Law the term "salary" is understood also as other incentive and compensation payments or other payments and remunerations paid (provided) to the taxpayer in connection with the relations of labor hiring according to the law.

1.2. The income - the amount of any means, cost of material and non-material property, other assets having cost including the securities or derivatives received by the taxpayer in property or added in its advantage, or acquired in the illegal way in the cases determined by subitem 4.2.16 of Item 4.2 of article 4 of this Law during the corresponding accounting tax period from different sources both in the territory of Ukraine and beyond its limits.

For the purpose of the taxation also join in the income of the taxpayer:

the regular property value which is transferred by the taxpayer by proxy to other person if conditions of such power of attorney provide the right of such other person to sell such property or to perform alienation by its different way, except such transfer between spouses within common equity or common joint property.

If the attorney returns the money received as a result of such sale (alienation) to the principal in the future, then:

the amount of such means is not included the total monthly or annual taxable income of the attorney;

the positive difference between the amount of such means and regular property value, transferred by proxy, is included the total taxable income of the principal of the corresponding accounting tax period;

cash amount or property value, including securities which arrive in property of the legal entity if according to the power of attorney provided by such legal entity or his founders to the taxpayer, any active (account) transactions with such means or property are performed only according to the decision of such taxpayer or according to its reorder (the separate power of attorney) - the third party.

1.3. The income with source of its origin from Ukraine - any income gained by the taxpayer or added in its advantage of implementation of any types of activity in the territory of Ukraine including, but it is not exclusive, in type:

a) percent on the debt requirements or obligations issued (emitted) resident;

b) the dividends added by the resident - the issuer of corporate laws;

c) the income in type of investment profit on implementation of transactions with the securities and corporate laws issued in others, than securities, forms;

d) the income in type of royalty, other payment for use of the rights intellectual (including industrial) property, received from resident;

e) the salary incomes added (paid, provided) as a result of implementation by the taxpayer of labor activity in the territory of Ukraine, from the employer, independently because whether such employer is resident or the nonresident, and also the salary added to person for implementation of work for hire as a part of crew (team) of the vehicle which is outside the territory of Ukraine, its territorial waters (exclusive economic zone), including on anchor parking, and belongs to resident on the property rights or is in its temporary (urgent) use and/or it is registered in the State ship register of Ukraine or the Ship book of Ukraine;

e) the income from provision in lease (leasing):

the real estate located in the territory of Ukraine;

personal estate if the lessor is resident of Ukraine or if use of such property is performed in the territory of Ukraine irrespective of whether the lessor is resident or the nonresident;

є) the income from sale of the real estate located in the territory of Ukraine;

g) the income from sale of personal estate if the fact of change of the owner (sale of object of personal estate) is subject to state registration and/or the notarial certificate according to the law of Ukraine or if the place of delivery of such personal estate to the acquirer is in the territory of Ukraine;

h) the income from implementation of business activity, and also independent professional activity in the territory of Ukraine;

i) the income paid (provided) by residents in the form of prizes and prizes, including in lottery (except state); charitable help, gifts;

?) the income in asset type descended if such assets or source of their payment are in the territory of Ukraine;

ї) other income in quality of payment or remuneration for civil agreements received by the resident or the nonresident if the source of payment (charge) of such income is in the territory of Ukraine, irrespective of the resident status of person paying them (charging).

1.4. The foreign income - the income other than the income with source of its origin from the territory of Ukraine.

1.5. The mortgage housing loan - the financial loan granted to physical person, society of co-owners of apartments or housing cooperative for the term of at least five complete calendar years for financing of the expenses connected with construction or acquisition of the apartment (room) or apartment house (its part) (taking into account the earth which is under such apartment house or personal plot) which are provided in property of the borrower with acceptance by the creditor of such housing (the earth which is under it or personal plot) as a deposit.

1.6. The total taxable income - any income, taxable according to this Law, added (paid) for benefit of the taxpayer during accounting tax period (further - the taxable income).

The total taxable income consists of the income which is subject to the final taxation in case of their charge (payment); the income, taxable as a part of the total annual taxable income; the income, taxable by other rules determined by this Law.

The total monthly taxable income is equal to the amount of the taxable incomes paid (added) within such reporting tax month.

The total annual taxable income is equal to the amount of the total monthly taxable incomes gained (added) within such accounting tax year.

1.7. Accounting tax period - period which begins from the first calendar day of the first month of such period and comes to an end with the last calendar day of the last month of such period. For monthly tax period the first and last months match.

If the physical person for the first time gains the taxable incomes in the middle of tax period, then the first tax period begins from the date of receipt of such income.

If the taxpayer dies, is recognized court to the dead or is unknown absent or loses resident status (in the absence of the tax liabilities as nonresident according to this Law), the period which is coming to an end in the afternoon on which the death of such taxpayer, pronouncement of such judgment or loss of resident status by it respectively falls is considered the last tax period.

1.8. The employee - physical person, directly own work performing labor function only according to the order or the order of the employer according to conditions of the employment contract (contract) signed with it according to the law. At the same time all benefits from accomplishment of such labor function (except the salary of such employee, other payments or remunerations in its advantage, stipulated by the legislation), and also all risks connected with such accomplishment or failure to carry out turn out (rush) the employer.

1.9. Independent professional activity - the activities consisting in participation of physical persons in scientific, literary, artistic, art, educational or teaching activities it is equal as activities of doctors (including stomatologists, dental technicians), lawyers, private notaries, auditors, accountants, appraisers, engineers or architects and assistants to the specified persons or persons occupied with religious (missionary) activities, other similar activities under condition if such faces are not hired employees or subjects of business activity which according to the paragraph to the second Item 1.8 of this Article are equated to the employee.

1.10. Real estate (real estate) - property objects which are located on the earth and cannot be moved to other place without loss of their quality or functional characteristics (properties), and also the earth.

1.10.1. The real estate other than the earth shares on:

a) buildings, namely: the rooms adapted for permanent or temporary stay in them of people and also the property objects which are functionally connected with such rooms.

Buildings are subdivided into houses (including hotels, motels, campings and other similar objects of tourist infrastructure), apartments, rooms in multi-family (utility) apartments, individual garages or places on garage parking or in garage cooperatives, the country houses and other objects of country (garden) infrastructure other than the earth;

b) constructions, namely: real estate objects other than buildings.

1.10.2. Real estate value in the form of the earth joins also the cost of its any capital improvements, including its planning, irrigation, drainage, and are expensive (way).

1.11. Person - physical person or the legal entity (its branches, departments, other separate divisions), and also representations of the legal entity.

1.12. Passive income - income gained in the form of percent, dividends, royalty, insurance payments and compensations, and also lease (leasing) payments for agreements of operational lease.

1.12-1. Pension contribution - funds deposited in non-state pension fund, insurance company or into the retirement deposit account in bank institution within non-state pension provision according to the Law of Ukraine "About non-state pension provision". For the purposes of the taxation the pension contribution is not collection on compulsory national pension insurance.

1.12-2. Pension contribution - funds deposited into the supplementary (deposit) account opened in bank under the agreement of pension contribution according to the law.

1.13. Tax - tax on the income of physical persons; the nalogooblozheniyeporyadok connected with determination of the taxation object, calculation and payment (deduction) of tax on the income of physical persons; the taxpayer (in the corresponding cases) - the taxpayer from the income of physical persons.

Tax on the income of physical persons - payment of physical person for the services rendered to him by territorial bulk in the territory of which such physical person has the tax address or person holding this tax according to this Law is located.

1.14. The tax address of physical person - the place of permanent or preferential residence of the taxpayer, the place of tax registration of the taxpayer determined according to the legislation.

1.15. The tax agent - the legal entity (its branch, department, other separate division) or physical person or representation of the nonresident - the legal entity which irrespective of their organization-legal status and method of taxation by other taxes shall charge, hold and pay this tax to the budget from name and at the expense of the taxpayer, keeps tax accounting and represent tax statements to tax authorities according to the law, and also bear responsibility for violation of regulations of this Law.

Tax agent, in particular, is the physical person which is the subject of business activity or performing independent professional activity, using wage labor of other physical persons on salary payment (other payments and remunerations) to such other physical persons.

1.16. The tax credit - the amount (cost) of the expenses incurred by the taxpayer - the resident in connection with purchase of goods (works, services) at residents - physical persons or legal entities within accounting year (except expenses on the tax discharge on value added and the excise duty) on which amount reduction of the amount of its total annual taxable income gained by results of such accounting year in the cases determined by this Law is allowed.

1.17. The employer - the legal entity (its branch, department, other separate division or its representation) or the physical person - the subject of business activity (including self-employed persons), signing employment contracts (contracts) with employees and performing duties on payment of the salary by him, and also to charge, deduction and payment of this tax in the budget, to charges on the salary fund, other obligations provided by the laws.

1.18. Personal estate - property, excellent from immovable.

1.19. Self-employed person - the taxpayer who is the subject of business activity or performing independent professional activity and not being the employee within such business or independent professional activity.

1.20. The physical person - the citizen of Ukraine, physical person without nationality or the citizen of foreign state.

1.20.1. The physical person - the resident - physical person which takes the residence in Ukraine.

If the physical person takes the residence also in foreign state, it is considered resident if such person takes the permanent address in Ukraine; if person takes the permanent address also in foreign state, it is considered resident if has more close personal or commercial relations (the center of vital interests) in Ukraine.

If the state in which the physical person has the center of vital interests cannot be determined or if the physical person does not take the permanent address in one of the states, it is considered resident if at least 183 days (including day of arrival and departure) during the period or the periods of tax year stay in Ukraine.

Sufficient (but not exclusive) condition of determination of the location of the center of vital interests of physical person is the permanent address of members of his family or its registration as the subject of business activity.

If it is impossible to determine the resident status of physical person, using the previous provisions of this subitem, the physical person is considered resident if it is citizen of Ukraine.

If contrary to the law the physical person - the citizen of Ukraine has also nationality of other country, then for the purpose of taxation by this tax such person is considered the citizen of Ukraine who has no the right to offsetting of the taxes paid abroad, provided by this Law or regulations of international agreements of Ukraine.

If the physical person is stateless person and provisions of paragraphs of the first - the fourth this subitem do not extend to it, then its status is determined according to rules of international law.

Good cause for determination of person by the resident is independent determination of the main residence by it in the territory of Ukraine according to the procedure, established by this Law, or its registration as self-employed person.

1.20.2. The physical person - the nonresident - the physical person which is not resident of Ukraine.

1.20.3. If in this Law the terms "resident" or "nonresident" in the corresponding cases are used, respectively are understood as these terms "the physical person - the resident" or "the physical person - the nonresident".

1.20.4. For the purposes of this Law members of the family of physical person are his wife or the husband, children of both physical person, and his wife or the husband (including adopted), parents, the grandma or the grandfather of both physical person, and his wife or the husband, brothers or sisters of both physical person, and his wife or the husband, grandsons of both physical person, and his wife or the husband, other dependents of such physical person or his guardians recognized as those according to the law.

His parents and parents of his husband or the wife, his husband or the wife, children of both such physical person, and his husband or the wife, including the children adopted by them are considered as members of the family of physical person of the first degree of relationship. Other members of the family of physical person are considered such which have the second degree of relationship.

1.21. Other terms are used in the values determined by the laws by the tax matters or other laws which are not contradicting such laws and this Law regarding determination of terms.

Article 2. Taxpayers

2.1. Taxpayers are:

the resident receiving as the income with source of their origin from the territory of Ukraine, and the foreign income;

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