OREANDA-NEWS. October 25, 2011. Verkhovna Rada of Ukraine has adopted a law "On Amending the Tax Code and Some Other Legal Acts of Ukraine" significantly altering small business entities’ simplified system of taxation, accounting and reporting.

Because small business is a powerful component of domestic economy ensuring its rapid development, employment and the growth of living standards, and playing an important role in forming competitiveness, the mutual society – power middle grounds elaborated a number of activities significantly changing the basics of the simplified tax system.

It is worth saying that, having undergone no change for 12 years, "tax rules" do not now correspond to the reality. Therefore, in order to stimulate business activities in Ukraine, changes have been adopted as follows:

- simplified taxation system income ceiling has been raised (for individuals: from 500 thousand UAH up to 3 million UAH, and for enterprises: from 1 million UAH up to 5 million UAH);

- single tax rate has been introduced: 3% revenue for individuals with less than 3 million UAH revenue subject to VAT liability, and 5% revenue VAT free (the legislation in force does not provide for this);

- limits has been abolished for individuals liable to single tax to categorize the expenditure of goods (works, services) as expenses;

- individuals liable to single tax may from now on register as VAT payers;

- 50-percent extra charge has been abolished that was applied to flat-rate single tax for each employee (effective legislation provides that extra 50% tax rate be paid for each employee).

Also, a mechanism has been elaborated for simplifying administrative procedures because complicated accounting and reporting procedures that existed before this law was adopted, used to disaccord the simplified taxation concept. Therefore, decisions have been made to:

- withdraw annual confirmation of single tax certification (legislation in force prescribes that simplified tax system application be submitted each year);

- abolish advance call payments for single tax payers liable to tax by percentage rates. The tax will be increased based on tax return (in accordance with the effective legislation – monthly, by advance call payments);

- establish annual reported period for individuals with low revenue (up to 150 thousand UAH);

- entitle individuals having no employees to be exempt from single tax for the time of vacation within a calendar month, and for a disease provided that it is evidenced by medical certificate and lasts for one calendar month or more;

- establish an obligation for individual single tax payers (except for those liable to VAT) to keep Revenue Account Book (without accounting for expenditure).

As current system of small business taxation is now actively exploited in minimizing tax liabilities, thus violating interests of employees and parties to taxation process, the law has been changed as follows:

- income tax payers should from now on provide an income and expenditure list broken down by counterparts liable to single tax;

- individuals liable to flat-rate tax are required to render services to the public and single tax payers only;

- higher single tax rates have been introduced for violating the provisions of simplified taxation system;

- single tax certificate will be annulled once a violation is revealed.

Thus, adoption of this law is a clear example of considering the small business as one of priorities of the State’s current policy, and the reform of the simplified taxation system aimed at fostering the economy development in line with complex reform being implemented in Ukraine nowadays.