LETTER
dated 08.09.2014 № 3095/6/99-99-17-03-03-15
On consideration of the letter regarding taxation of personal income by military fee
The State Fiscal Service of Ukraine, in accordance with Article 52 of the Tax Code of Ukraine (hereinafter - the Code), has considered the letter of the Independent Association of Banks of Ukraine dated 07.08.2014 # 2033-07/08, which was received directly by the SFS of Ukraine (inbound dated 08.08.2014 # 16786/6) and from the Verkhovna Rada Committee on Taxation and Customs Policy by letter dated 28.08.2014 # 04-30/10-590 (inbound # 557/2 dated 02.09.2014), regarding taxation of personal income by military fee and informs the following.
The Law of Ukraine dated July 31, 2014 No. 1621-VII "On Amendments to the Tax Code of Ukraine and Some Other Legislative Acts of Ukraine" (hereinafter - the Law No. 1621) supplemented subsection 10 of Section XX of the Transitional Provisions of the Code with para. 161, which provides that the military duty is temporarily established until January 1, 2015.
In accordance with subpara. 1.1 of para. 161 of subsection 10 of Section XX of the Code, the taxpayers of the duty are the persons specified in para. 162.1 of Article 162 of the Code, namely a resident (non-resident) individual who receives income from the source of its origin in Ukraine; tax agent.
The object of taxation of the fee is, in particular, income in the form of wages, other incentive and compensation payments or other payments and remuneration accrued (paid, provided) to the payer in connection with labor relations and under civil law contracts (sub-clause 1.2 of clause 161 of subsection 10 of Section XX of the Code).
Labor legislation consists of the Labor Code of Ukraine (the "Labor Code") and other legislative acts of Ukraine adopted in accordance with it.
Employees enter into labor relations with the company by entering into employment agreements.
Pursuant to Article 21 of the Labor Code, an employment agreement is an agreement between an employee and the owner of an enterprise, institution, organization or an authorized body or individual, under which the employee undertakes to perform the work specified in this agreement, subject to internal labor regulations, and the owner of the enterprise, institution, organization or an authorized body or individual undertakes to pay the employee wages and provide the working conditions necessary for the performance of work provided for by labor legislation, collective bargaining agreements, and other applicable laws.
At the same time, it should be noted that the forms and system of remuneration, labor standards, rates, tariff scales, rates, salary schemes, conditions for the introduction and amounts of allowances, surcharges, bonuses, rewards and other incentive, compensation and guarantee payments are established by enterprises, institutions, organizations independently in a collective agreement in compliance with the norms and guarantees provided for by law, general and sectoral (regional) agreements (Article 97 of the Labor Code).
The definition of "wages" is set forth in part one of Article 94 of the Labor Code and Article 1 of the Law of Ukraine No. 108/95-VR "On Remuneration of Labor" dated March 24, 1995 (hereinafter - Law No. 108): it is remuneration, usually calculated in monetary terms, which the owner or his authorized body pays to the employee for the work performed by him.
Article 2 of Law No. 108 defines the structure of wages: basic and additional wages, other incentive and compensation payments.
Basic salary is remuneration for work performed in accordance with established labor standards (time, output, service, job duties), which is determined in the form of tariff rates (salaries) and piece rates for workers and official salaries for employees.
Additional wages are remuneration for work in excess of the established norms, for labor success and ingenuity, and for special working conditions, including additional payments, allowances, warranty and compensation payments provided for by applicable law; bonuses related to the performance of production tasks and functions.
Other incentive and compensation payments, which include payments in the form of remuneration based on the results of work for the year, bonuses under special systems and regulations, compensation and other monetary and material payments that are not provided for by the applicable laws or that are made in excess of the norms established by the said laws.
In addition, according to sub-clause 14.1.48 of clause 14.1 of Article 14 of the Code, for the purposes of Section IV of the Code, wages are basic and additional wages, other incentive and compensation payments paid (provided) to the taxpayer in connection with the employment relationship in accordance with the law.
The use of labor of individuals (performance of work, provision of services) may be carried out both on the basis of an employment contract and on the basis of a civil law contract.
Thus, pursuant to Articles 837 and 901 of the Civil Code of Ukraine (hereinafter - the "CCU"), under a contractor/service agreement, which is a type of civil law contract, one party (contractor/performer) undertakes to perform work/serve, and the other party (customer) pays for the performance of the said work/service, which is confirmed by primary documents, in particular, acts of work performed (acceptance certificates).
Thus, the object of taxation by the military fee means income accrued (paid, provided) to the taxpayer in connection with the employment relationship in accordance with the terms of the labor and civil law contracts and belonging to the payroll fund. It should be noted that such income is determined without deduction of personal income tax, unified social tax, insurance contributions to the accumulation fund, in cases provided for by law, etc.
Regarding the application of clause 164.5 of Article 164 of the Code in the course of taxation of accrued income in kind by the military fee.
Article 94 of the Law of Ukraine dated July 16, 1999 No. 996-XIV "On Accounting and Financial Reporting in Ukraine" (hereinafter - Law No. 996) stipulates that wages are remuneration, usually calculated in monetary terms, which the owner or his authorized body pays to the employee for the work performed by him.
Companies keep their accounting records and prepare financial statements in the Ukrainian currency (Article 5 of Law No. 996).
Accounting is a mandatory type of accounting maintained by a company. Financial, tax, statistical and other types of reporting that use monetary measurements are based on accounting data (Article 3(2) of Law No. 996).
The provisions of para. 164.5 of Art. 164 of the Code are applied when accruing income in any non-monetary form to determine the tax base for personal income tax.
In addition, the provisions of clause 161 of subsection 10 of the Code do not provide for the application of the coefficient specified in clause 164.5 of Article 164 of the Code.
Also, in accordance with subpara. 1.4 of para. 161 of subsection 10 of Section XX of the Code, the accrual, withholding and payment (transfer) of the military fee to the budget are carried out in accordance with the procedure established by Article 168 of the TCU, at the rate specified in the subpara.
In particular, subpara. 168.1.2 of para. 168.1 of Art. 168 of the Code provides that the tax is paid (transferred) to the budget when paying taxable income in a single payment document. Banks accept payment documents for the payment of income only if a payment document for the transfer of this tax to the budget is submitted simultaneously.
Therefore, when accepting payment documents for the payment of income subject to military tax, banks must take into account the conditions set forth in sub-clause 168.1.2 of clause 168.1 of Article 168 of the Code.
With regard to the payment of the average salary to an employee performing military service under conscription during mobilization for a special period, the following should be noted.
Article 2 of Law No. 108 defines the structure of wages, which, in particular, includes additional wages, including guarantee and compensation payments provided for by applicable law.
Thus, guarantees for employees during the performance of state or public duties are provided for in Article 119 of the Labor Code, according to which, for the period of performance of state or public duties, if under the current legislation of Ukraine these duties can be performed during working hours, employees are guaranteed the preservation of their job (position) and average earnings.
In addition, pursuant to part two of Article 39 of the Law of Ukraine No. 2232-XII "On Military Duty and Military Service" of March 25, 1992, citizens of Ukraine who are subject to military service during mobilization shall retain their job (position) and average salary at an enterprise, institution or organization for a special period of time, but not more than one year.
In other words, the accrual of average earnings for the period of performance of state or public duties is a guarantee payment, is included in additional wages and is subject to military duty on a general basis.
We also note that in accordance with sub-cl. 170.5.3 of cl. 170.5 of Art. 170 of the Code, dividends accrued to a taxpayer on shares or other corporate rights that have the status of preferred or other status that provides for the payment of a fixed amount of dividends or an amount exceeding the amount of payments calculated for any other share (corporate right) issued by such taxpayer in accordance with sub-cl. 153.3.7 of subpara. 153.3 of Article 153 of the Code, for tax purposes are equated to the payment of wages with the corresponding taxation.
In accordance with subpara. 14.1.47 of para. 14.1 of Art. 14 of the Code, fringe benefits are funds, tangible or intangible assets, services, and other types of income paid (provided) to a taxpayer by a tax agent, if such income is not a salary and is not related to the performance of employment duties or is not remuneration under civil law contracts (agreements) concluded with such a taxpayer (except as expressly provided for in Section IV of this Code), and therefore are not subject to military duty.
Regarding the taxation of wages for the period before 03.08.2014 and after 03.08.2014 with the military fee.
Law No. 1621 came into force on August 3, 2014. Pursuant to Article 58 of the Constitution of Ukraine, laws and other regulatory legal acts do not have retroactive effect, except in cases where they mitigate or cancel the liability of a person.
Since Law No. 1621 came into force on August 3, 2014, and the tax agent is obliged to withhold the military fee when calculating the income specified in subparagraph 1.2 of paragraph 161 of subsection 10 of Section XX of the Code, the income accrued before August 3, 2014, but paid after August 3, 2014, is not subject to military fee. At the same time, the amounts of income accrued after August 03, 2014 for the period up to August 03, 2014 are subject to military duty on a general basis.
Pursuant to sub-clause 4, clause 4 of the Regulation on the State Treasury Service of Ukraine approved by the Decree of the President of Ukraine No. 460/2011 dated April 13, 2011, the State Treasury Service of Ukraine shall open and close accounts of the current budget period and open accounts of the next budget period.
For the purpose of crediting revenues to the general fund of the state budget, the State Treasury Service of Ukraine opened accounts under the budget revenue classification code 11011000 "Military fee" starting from August 06, 2014.
Information on the details of the accounts for payment by territorial and administrative units of Ukraine is published on the web portal in the section "Budget Accounts".
Tax agents are subject to financial liability (in the form of penalties (fines) and/or penalties) and administrative liability for failure to accrue, withhold and/or pay (fail to transfer) the military fee.
Thus, Art. 127 of the Code provides that failure to accrue, withhold and/or pay (fail to transfer) taxes by a taxpayer, including a tax agent, before or during the payment of income in favor of another taxpayer shall result in a fine of 25 percent of the tax amount to be accrued and/or paid to the budget.
The same actions committed repeatedly within 1095 days are subject to a fine of 50 percent, and those committed for the third time or more are subject to a fine of 75 percent.
These penalties do not apply if the failure to accrue, withhold and/or pay (remit) personal income tax is independently detected by the tax agent when recalculating this tax and corrected in subsequent tax periods during the tax (reporting) year in accordance with the provisions of the Code.
In addition, pursuant to Article 129 of the Code, on the day of maturity of the tax liability, a penalty is charged at the rate of 120 percent per annum of the discount rate of the National Bank of Ukraine effective on the day of payment (accrual) of income.
At the same time, in accordance with sub-clause 1.2 of clause 161 of subsection 10 of Section XX of the Code, the object of taxation by the military fee is, in particular, the winnings in the state and non-state money lottery, the winnings of the player (participant) received from the organizer of the gambling game.
Pursuant to clause 170.6 of Article 170 of the Tax Code, the tax agent of a taxpayer when accruing (providing) income in the form of lottery prizes (winnings) or in a raffle, prizes and winnings in cash received for winning and/or participating in amateur sports competitions, including billiards, is the person who makes such accrual (payment).
The basic principles of state regulation of the lottery sphere in Ukraine are established by the Law of Ukraine dated September 06, 2012 No. 5204-VI "On State Lotteries in Ukraine" (hereinafter - Law No. 5204), which, in particular, defines that the operator of state lotteries is a legal entity - a business entity that has obtained the right to conduct state lotteries in accordance with the procedure established by this Law; the distributor of the state lottery is a legal entity or an individual who, on behalf of the operator of state lotteries, accepts bets directly from players on behalf of the operator of state lotteries.
At the same time, clause 4 of Article 6 of Law No. 5204 establishes that state lottery operators are responsible for maintaining and submitting statistical and accounting reports on state lotteries, the movement of lottery tickets and funds in accordance with the procedure established by law.
Chairman
I. O. Bilous