List of innovations in legislation that significantly change the provision of services to non-residents

List of innovations in legislation that significantly change the provision of services to non-residents

In 2010, certain changes were made to the Ukrainian tax code, which significantly changed taxation as a whole. Especially these innovations affected non-residents owning offshore companies.

Today, taxpayers do not have the right to include in expenses losses in full, which were in the reporting period. This category of expenses includes payments related to the acquisition of the following services from non-residents whose company is registered in the offshore zone:

• Consulting.

• Advertising.

• Marketing.

The list of countries included in the list of offshore zones, after making changes to the Tax Code remained unchanged.

Ukrainian companies that purchase non-resident services through the engineering system have the right to include in the expenses in the reporting period no more than 5% of customs prices for equipment.

The inclusion of the above costs in the list of losses in the reporting period is not carried out in the following cases:

• If the Ukrainian company buys engineering services from a legal entity - non-resident, registered in the offshore zone.

• If the contract for the purchase of engineering services is not concluded with the beneficiaries of the offshore company.

Also royalty payments for non-residents were changed. Until 2010, Ukrainian legislation classified these payments as gross expenses. Due to this, it was possible to achieve a significant reduction in the tax base. Today, these methods are significantly limited.

When can royalties not be classified as expenses?

• If royalties are paid to a non-resident registered in an offshore zone.

• If royalties are paid to a person who is not the true owner of an offshore company.

• If royalties are paid to a person who is exempt from paying tax when receiving payments of this type in the country in which it is registered.

It is because of these changes in the Tax Code that today it is impossible to pay royalties to non-resident intermediaries. This, of course, complicated the conduct of business activities on the territory of our country related to payments to non-residents registered in offshore zones. But Ukrainian businessmen have become accustomed to similar realities. And they all know that with the help of a qualified tax consultant, you can achieve effective optimization of the company's work (without violating the current legislation).

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