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Tax aspects of corporate distance-selling for non-residents in Ukraine. The search for optimal legal model

Dmitrij Yovdij
Partner
Law Company "Leetas"

There are several basic options for the distance-selling company’s business for non-residents of Ukraine:

  • through the registered in the territory of Ukraine legal entity or representation;
  • through the use of business entities being on a simplified system of taxation;
  • without  business registration in Ukraine.

Meanwhile, there are some disadvantages and risks encountered by the legal entity with registration in Ukraine:

  • a significant tax burden on economic entities of Ukraine;
  • fiscal approach of the tax authorities, aimed at filling the state budget;
  • the litigation tax payer and tax services in 9 of 10 cases of tax benefit;
  • frequent tax audits (usually with additional taxes and penalties);
  • the complexity of registration (especially for offices).

A list of current Ukrainian taxes includes:

  • 20% import VAT + customs duty under the Customs Tariff of Ukraine;
  • income tax:
  1.  by 31.12.2012 - 21%;
  2.  from 01.01.2013 to 31.12.2013 - 19%;
  3.  from 01/01/2014 - 16%;
  • income tax expense for the permanent missions - 15%;
  • unified social contribution - 37% of the RFP Fund;
  • 20% VAT on the sale of goods to consumers.

Activity with the use of Entrepreneurs group also has its disadvantages and risks.

Entrepreneur pays single tax flat tax in the amount of:

  • up to 20% of the minimum s \ n (1st and 2nd group) - the maximum annual amount of revenue - up to 1 million UAH;
  • 5% of revenue (third group) - the maximum annual revenue of up to 3 million USD;
  • 10% of revenue (Group 5) - the maximum amount of revenue up to 20 million USD.

Without registration in Ukraine legal entities have their advantages.

Prerequisite for this is the import of goods into Ukraine only through international postal items!

There is also an opportunity to completely lift the burden of the taxes payment  to the country of incorporation.

There is no VAT and customs duties on importation of goods by international mail under the conditions:

  • the cost of the goods up to 300 Euro;
  • product comes from one sender to one recipient no more than once a day;
  • the range and quantity of the goods should not look like a "bulk purchases";
  • when goods cost more than 300 euros - 20% VAT and import duty is 10%.

Operating without registration in Ukraine entity provides for the formation of the tax credit on export VAT by the export of goods from the country of registration. When using consignment schemes it  is real.

Key terms of customs clearance as follows:

  • main problem - the rationale that the imported goods are international mail;
  • registration of international mail marked "consignment" is on the letterhead of the Single Administrative Document (Cabinet of Ministers Resolution № 450 from 21.05.2012);
  • in a single customs declaration form on a single administrative document up to 999 products may be declared.

When operating without registration in Ukraine there is a risk of a legal entity the application of the permanent mission of a foreign legal entity in Ukraine: a permanent representation - a fixed place of business through which all or part of economic activity is non-resident in Ukraine, in particular: a place of management, a branch; office, factory, workshop, and any other place of extraction of natural resources, warehouse or premises used for the delivery of goods. For tax purposes, the term "permanent establishment" includes residents who have the authority to act on behalf of non-residents, which gives rise to a non-resident of civil rights and obligations (contract (contracts) on behalf of non-residents, maintain (store) stocks of goods belonging to a non-resident , warehouse that supplied the goods on behalf of non-residents, except for residents with the status of a temporary storage warehouse or a customs bonded warehouse) - 14.1.193 sub paragraph 14.1 of Article 14 of the Tax Code of Ukraine.

Fixed place of business solely for the purposes of non-resident activity of a preparatory or auxiliary character - not representative (paragraph 14.1.193 paragraph 14.1 of Article 14 of the Tax Code of Ukraine.

In this case, there are more ways of protection. The contractual relationship between the company and a non-resident and the Ukrainian company-contractor (or representative) shall be made to perform certain types of work, from the content of which is clearly evident that these works are for non-resident subsidiary to the core business of a Russian legal entity - trade.

Opportunities for Russian DS companies to work through the registered legal entity in Ukraine:

  • liberalized customs and trade laws between Ukraine and Russia in connection with the signing of the Treaty "On the free trade zone" of the year 18.10.2011 (ratified by Ukraine and Russia);
  • introduced duty-free export and import of goods between states;
  • zero VAT and no customs duties on the export of goods from the territory of the Russian Federation in relation to goods sent by international mail (paragraph 11 part 1 of Article 131 of the Federal Law of the Russian Federation on November 27, 2010 N 311-FZ "On Customs Regulation in Russian Federation ");
  • ability to minimize income taxes due to costs of advertising and market research (marketing), as well as pre-selling products.
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