Peculiarities of taxation of operations with securities alienation by the excise tax
Since January 3, 2013 the notion of the excise tax was expanded – currently it also includes a special tax on operations with alienation of securities and derivatives transactions (subpara.14.1.4 of para.14.1 of Article 14 of the Tax Code of Ukraine (hereinafter – “the TC of Ukraine “))1.
According to the general rule, the payers of this tax are natural persons and legal entities – residents or non-residents (including their separated divisions), who accomplish the operations of sale, exchange or other methods of securities alienation (item 1 of subpara. 212.1.9 of para. 212.1 of Article 212 of the TC of Ukraine). The indicated operations are liable to excise tax (subpara. 213.1.7 of para. 213.1 of Article 213 of the TC of Ukraine), except for cases envisaged by subpara. 213.2.3 – 213.2.7 of para. 213.2 of Article 213 of the TC of Ukraine.
Moreover we draw your attention to the fact that under the general rule operations of promissory notes alienation are also liable to excise tax, since according to the Law of Ukraine “On Securities and the Stock Market” promissory notes are referred to debt securities. Besides, according to the current established practice, including the court practice, payment of goods by means of promissory notes of the third parties are the barter operations, and therefore while carrying out these operations the ownership on the promissory notes and on its alienation passes. So, in case if two business entities settle accounts with the promissory notes of the third business entity, then this operation of alienation of promissory notes shall be taxable. The exception of this rule may be, for instance, the situation in which the business entity – the promissory notes’ holder brings the promissory notes for redemption to the issuer of the promissory notes with the reference to place of funds to an account of the third entity, with whom the promissory notes’ holder has an intention to settle accounts.
Calculation of the amount of tax is carried out by multiplying the tax rate (indicated in Article 215 of the TC of Ukraine and range from 0% to 1,5%) on the base of taxation (contract value of securities is specified in the primary accounting documents on the operation of securities alienation).
The date of the tax liabilities occurrence is the date of receiving the profit from sales, exchange or other means of alienation of securities and derivatives (para. 216.7 of Article 216 of the TC of Ukraine).
Concerning to the payment and reporting of tax securities operations, the TC of Ukraine contains certain inconsistencies that preclude implementation of these obligations in practice, namely:
As it was mentioned before, according to subpara. 121.1.9 of para 121.1 of Article 121 of the TC of Ukraine the taxpayers of the indicated tax are the persons who accomplish operations of securities alienation. Besides, according to Article 219 of the TC of Ukraine, liabilities on charge, deduction and payment of tax to the budget, on keeping the tax records, submission of tax return to the tax authorities and bearing responsibility for the violation of rules of tax legislation are entrusted to the tax agent. In particular the tax agent is obliged to transfer the amount of the tax to the budget during 10 calendar days, following the last day of the deadline for submission of the quarterly tax declaration. According to Article 219 of the TC of Ukraine, the tax agent is a security broker, including the bank, and for operations with securities of collective investment institutions of open type – their issuer. However, the TC of Ukraine does not stipulate who exactly should act as the tax agent in normal situations of payment of goods by promissory notes of the third parties.
The basic period for drawing up and submitting the report on this tax is a quarter and the report is submitted according to the general rules of submission of the tax declaration, which are established in Article 46 of the TC of Ukraine. However, currently the form and the procedure for completing a tax declaration (or calculation) on operations with securities are not approved, but the current form of excise tax declaration and procedure of its completion, which have been approved by the Order of the State Tax Administration of Ukraine No.1030 as of December 24, 2010, after establishment of a special tax remained unchangeable and does not contain the lines for reporting on this type of tax.
Although at the moment the situation on the procedure of submission of tax reports remains unsolved, the Ministry of Finance of Ukraine by its Order No.5 of January 9, 2013 “On addition to the budget classification” has already completed the classification of the budget income with the code of budget classification 14021200 “Operations with securities alienation and derivative transactions” for transferring special tax on operations with securities alienation.
Therefore, at presence the obligation of payment of tax and the obligation of submission of tax reports are envisaged, however this procedure is not completely regulated yet (how and who should pay). Concerning the question whether the taxpayer- alienator of promissory notes may pay the special tax to the budget by himself, Informational Department of the State Tax Service informs that the said issue is on the stage of endorsement, as well as the issue of the form of reporting for the taxpayer.
Besides, a question about obligation of taxation on the excise tax of operations with promissory notes remains open. This should be expected since, obviously, pursuing the goal of taxation of operations with marketable securities and derivatives, which are in circulation outside the stock exchange, the legislator hastened to resume under this tax operations with all kinds of securities, including with promissory notes.
Due to the abovementioned, we believe that in the nearest future the provisions of the TC of Ukraine on excise tax on operations with securities alienation may be changed.
The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.
1 The indicated amendments have been made to the TC of Ukraine on December 6, 2012 No. 5519-VI “On amendments to the Tax Code of Ukraine regarding further improvement of administration of taxes and duties”.
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