News (#11 November 2018)

DRAFT

Token status and tax privileges

A Draft Law amending the Tax Code of Ukraine regarding taxation of transactions with virtual assets in Ukraine (No. 9083) has been submitted to the Ukrainian Parliament.

According to the Draft, virtual assets are any form of a record within a distributed ledger of records in digital form that can be used as a medium of exchange, accounting unit, or as a store of value. The term virtual asset in this Code refers to cryptocurrency and token-assets.

A cryptocurrency is defined as a virtual token-shaped asset operating as a medium of exchange or a store of value. A token is a digital accounting unit within a distributed ledger of records in digital form which has cryptographic security.

At the same time, the term mining refers to the taxpayers activity in performing calculations aimed at maintaining the operation of the distributed ledger of records in digital form, including those aimed at obtaining virtual assets. The Drafts authors envisage that income as a positive difference between the income received by a taxpayer from the sale of virtual assets (exchange thereof for currency values) and the costs connected with their acquisition and/or mining shall be considered as profits from transactions with virtual assets for the purposes of Section IV of this Code.

It is proposed that statutory provisions on peculiarities of taxation of transactions with virtual assets be included in Article 141 of the Tax Code. The financial result following transactions with virtual assets shall be determined separately from the financial result following other types of taxpayers activity pursuant to national or international financial reporting standards. The financial result before taxation shall be increased by the sum of negative financial result from transactions with virtual assets presented within the financial result before taxation for the tax (reporting) period pursuant to national accounting standards or international financial reporting standards.

The taxpayer shall be solely responsible for calculating profits from transactions with virtual assets and for payment of taxes on such profits.

It will be established that transactions on the issue, emission of virtual assets, exchange of virtual assets of one type for another shall not be subject to taxation, except for exchange of tokens-assets certifying rights to goods, the supply of which are subject to taxation, transactions on supply and sale of virtual assets, excluding supplies, sales of tokens-assets certifying rights to goods, the supply of which are subject to taxation.

The following standard is proposed for inclusion in transitional provisions: temporarily, for the period up to and including 31 December 2024, the corporation tax rate, which is applied to profits from transactions with virtual assets, will be 5%.

Principles of environmental policy outlined

The Draft Law On the Basic Principles (Strategy) of State Environmental Policy of Ukraine for the Period until 2030 has been adopted in its first reading. The Draft contains revised main strategic objectives of state environmental policy based on the causes of environmental problems of Ukraine and financial means for solving them. Goals and objectives are aimed at removing the causes of negative phenomena and not their consequences. In general terms, the Strategy is aimed at energy saving and improving energy efficiency, increasing production of clean energy, introducing the best available low-carbon and resource-saving production technologies, as well as of modern heat and energy saving construction technologies, which will enable significant reduction in emissions of greenhouse gases and pollutants into the air, as well as discharging pollutants into water reservoirs. In its turn, the problem of accumulation of household solid waste will be solved by way of minimizing its creation, ensuring maximum use of resource-containing waste and construction of powerful sites for the disposal of hazardous waste.

Improving financial restructuring procedure

The Cabinet of Ministers proposes that the Ukrainian Parliament adopt Draft Law No.9236 On Amendments to Legislative Acts of Ukraine Regarding the Improvement of the Conduct of the Financial Restructuring Procedure.

The explanatory note emphasizes that, as of 1 January 2018, the share of non-performing loans in the loan portfolio of the Ukrainian banking system reached 55% of the total volume of loans. Moreover, the note also mentions the high volume of non-performing loans in the portfolio (about UAH 400 billion) of public sector banks.

In particular, the document proposes introducing amendments to the Law On Financial Restructuring, which are designed to make joint conduct of a financial restructuring procedure for several obligors that are related parties possible. That is, this refers to a group of legal entities under shared control, but which have different (non-common) lenders.

To improve the practice of application of sanctions, the draft proposes to establish responsibility for failure to fulfill obligations of obligors and/or attracted lenders or related persons of the obligor on the basis of a relevant arbitral judgment.

At the same time, it also proposes to introduce more accurate determination of the time of non-judicial settlement of enforced foreclosure on the subject of mortgage and/or use of the appropriate non-judicial method of enforced foreclosure on the subject of collateral when the value of the relevant property is found to be insufficient to fully satisfy requirements of the attracted lender to keep the obligation secured by a mortgage and collateral (pledged movable assets) in its relevant (outstanding) part.

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