Draft

Government proposes changes to telecommunications industry

The Cabinet of Ministers registered Draft Law No. 10135 On Amendments to Certain Legislative Acts of Ukraine to Reduce the List of Types of Economic Activities Subject to Licensing with Parliament. This document proposes to replace the licensing of activities in the telecommunications industry with notification on commencement of activities provided by entities operating in this industry.

It is proposed to increase fines for violation of terms and conditions regulating activities in the telecommunications industry and usage of the radio frequency resource of Ukraine, as permitted by licenses, authorizations, notifications on commencement of activity in the relevant industry from 100-200 to 500-1000 minimum incomes of citizens (exempt income).

It is proposed to increase fines for repeat violations from 200-300 to 1,000-2,000 exempt incomes.

Furthermore, the Draft also contains a proposal to impose fines of 1,000-2,000 exempt incomes for provision of inaccurate or not full and complete information in the notification on commencement of economic activity by the entity, and to also impose fines of 500-1,000 exempt incomes for failing to meet the deadline on provision of notification on all alterations of the data specified in the same on commencement of economic activity.

According to the Draft Law, the National Commission for the State Regulation of Communications and Informatization should, in its turn, approve a reference list of types of telecommunication services and forms of telecommunication networks and description of services.

The authors of the document issued a reminder that despite the abolition of licenses in this industry, which came into force on 1 January 2018, the NCSRCI continues exercising its authorities on the licensing of activities in the telecommunications industry under the law on licensing of economic activities taking into account the specific features determined by the Law of Ukraine On Telecommunications.

Thus, the Draft Law is intended to abolish the legislative conflict between provisions of the Law On Licensing and the Law On Telecommunications.

Social Policy Ministry proposes to ban employment of individual entrepreneurs

The Ministry of Social Policy proposes to prohibit companies concluding civil relations with individual entrepreneurs instead of employing such persons. The relevant Draft Law On Amendments to Certain Legislative Acts of Ukraine on Promoting the Protection of Employees’ Rights and Combating the Undeclared Employment was published on the Ministry’s website.

It is proposed to supplement the Labor Code with a new article called “Characteristics of employment relations”. The article will include 7 criteria describing employment relations between two people. The existence of any three of these criteria at the same time will be sufficient to recognize such relations as employment, and to make the employer pay a fine of 30 minimum wages for each off-the-books employee (more than UAH 125,000 as of February 2019).

The said criteria include: payment frequency for work performed by the person for the benefit of another person (twice and more); personal performance by the person acting on behalf and under the control of the person, for whose benefit it is performed; remuneration for the work performed is the only source or is 75% or more of the income of IE over the past six months; the work is performed at the place of work determined by the employer and in accordance with provisions of internal labor rules and regulations; the person performs the work (provides services) similar to those performed by members of staff of the employer; organization of working conditions (including provision of a place of work) is ensured by a person, for whose benefit the work is performed; working hours and off-work time are set by the person, for whose benefit the work is performed.

Companies that enter into a civil agreement with IE reduce their tax liabilities. They are exempted from paying 22% of the Single Social Contribution charged from the payroll of employees. Unlike an employee, an individual entrepreneur of group three, subject to the simplified taxation system, pays just 5% of income received plus the minimum monthly social contribution to the state budget (UAH 918 as of February 2019).

Business said to oppose bill’s idea of raising income tax on “rich pay more” basis

Draft Law No. 10066 on increasing income tax depending on the level of income has been registered at the Ukrainian Parliament.

The Draft proposes to introduce a progressive scale of PIT with a maximum tax rate of 48%.

The explanatory note states that personal income tax rates in Europe are significantly higher than the 18% rate in Ukraine. The maximum personal income tax in France is 75%, in Canada it is 50% and in Norway 39%.

The authors of the Draft Law propose to introduce a progressive scale for personal income tax on a “rich pay more” basis so as “to restore social justice”.

Representatives of the business sector reportedly do not support the introduction of a progressive taxation scale and increase of the tax burden for prompt payers.

A statement by the European Business Association notes that “The Draft Law affects the widespread tax evasion schemes to no extent. Hence, fair employers will have to increase their costs to maintain salaries of their employees at the same level and at the same time will face increasing competition with the shadow economy sector, which will continue using tax evasion schemes.”