EXPENSES NOT TAKEN INTO ACCOUNT WHEN DETERMINING TAXABLE PROFIT IN UKRAINE | UBC
Expenses not taken into account when determining the taxable object
Like the legislation that applied previously, Section III of the Tax Code of Ukraine contains a list of expenses that are not taken into account when determining the taxable object for corporate profit tax.
These included expenses unrelated to business activity, including receptions, presentations, celebrations and entertainment events; payments under commission, agency and similar agreements; repayment of loans and borrowings received; dividends, fines, penalties and late-payment charges.
Specific restrictions on recognising expenses when determining the taxable object were established by Articles 138, 139 and 140 of the Tax Code of Ukraine. Several provisions applying during the relevant period are set out below.
Unlike the previous procedure, the Code provided that expenses on purchasing goods, works, services and other tangible or intangible assets from an individual entrepreneur paying single tax were not recognised for tax purposes. An exception concerned expenses on works or services purchased from a single-tax individual entrepreneur carrying on activities in the information technology field.
Restrictions relating to royalties required separate attention. Royalty accruals in favour of the following were not included in expenses of the reporting period:
- a legal entity exempt from corporate profit tax or paying it at a different rate;
- a person paying tax as part of other taxes, except individuals;
- a non-resident — to the extent exceeding 4% of revenue from sales of products, goods, works and services for the previous reporting year, excluding VAT and excise tax. The original text separately mentioned exceptions for permanent establishments of non-residents, television and radio broadcasters and rights to use certain audiovisual, musical and literary works.
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