Questions - answers about tax rebate for certain types of expenses
Question:
What amount or cost of medicines for provision of medical care to prevent spread of the coronavirus disease in Ukraine (COVID-19) is included in expenses for exercising right to the tax rebate?
Answer:
Tax Code of Ukraine (hereinafter – Code) stipulates that tax rebate for individuals who are not business entities is a documented amount (cost) of expenses of resident taxpayer in connection with the purchase of goods (works, services) from residents – individuals or legal entities during reporting year, on which it is allowed to reduce its total annual taxable income received as a result of such reporting year in the form of wages, in cases specified by this Code (Sub-paragraph 14.1.170 Paragraph 14.1 Article 14 of the Code).
Taxpayer’s right to tax rebate, grounds for its accrual, list of costs allowed to be included in tax rebate are defined in Article 166 of the Code.
Sub-paragraph 166.3.2 Paragraph 166.3 Article 166 of the Code stipulates that taxpayer has right to include in tax rebate in reduction of taxpayer’s taxable income as a result of reporting tax year, determined taking into account provisions of Paragraph 164.6 Article 164 of the Code, amount or property value transferred by taxpayer in the form of donations or charitable contributions to non-profit organizations registered in Ukraine and entered in Register of non-profit organizations and institutions on the date of transfer of such funds and property, not exceeding 4% of amount of its total taxable income for such reporting year.
At the same time, in order to prevent spread of the coronavirus disease in Ukraine (COVID-19), the Law of Ukraine as of 30.03.2020 № 540-IX “On amendments to certain legislative acts of Ukraine aimed at providing additional social and economic guarantees in connection with spread of coronavirus disease (COVID-19)” amended Paragraph 11 Sub-section 1 Section XX “Transitional Provisions” of the Code, according to which exercising right to tax rebate upon results of 2020, pursuant to provisions of Article 166 of this Code, the amount or cost of medicines for provision of medical care to patients, disinfectants and antiseptics, medical equipment, personal protective equipment, medical devices for patient screening, consumables for medical care, medical products, laboratory equipment, consumables, reagents for laboratory research; medical devices, consumables for infectious diseases departments, pathology departments, etc., personal hygiene products, food and / or goods from list determined by the Cabinet of Ministers of Ukraine, which are voluntarily listed (transferred) to public associations and / or charitable organizations and / or the central executive body that implements state policy in the health care sphere and / or other central executive bodies that implement state policy in the areas of sanitary and epidemiological well-being of population, quality control and safety of medicines, combating HIV / AIDS and other socially dangerous diseases, and / or person authorized to procure in the health care sphere, and / or health care institutions of state and / or communal property, and / or structural units for health care of regional, Kyiv and Sevastopol city state administrations during quarantine established by the Cabinet of Ministers of Ukraine in legislative manner throughout Ukraine to prevent spread of coronavirus disease in Ukraine (COVID-19) is included in the tax rebate in full without regard to restrictions specified in Sub-paragraph 166.3.2 Paragraph 166.3 Article 166 of this Code.
As follows, according to results of 2020, the taxpayer’s expenses incurred in order to prevent spread of the coronavirus disease in Ukraine (COVID-19) will include amount of funds or cost of goods that are voluntarily transferred (given) as charity, in particular to relevant organizations and / or executive bodies, health care institutions, etc.
List of goods (including medicines, medical devices, etc.), costs of which will be included in tax rebate, is determined by the Cabinet of Ministers of Ukraine.
Question:
What documents must be submitted with property and income tax declaration of taxpayer, who has status of an internally displaced person, to exercise right to the tax rebate to reduce taxable income on the amount paid by this person in the form of rent under the lease agreement (apartment, house)?
Answer:
The following must be submitted with property and income tax declaration:
copy of rental agreement;
copies of payment and settlement documents confirming payment (except for electronic settlement documents);
application stating information on the absence of conditions that do not entitle to the tax rebate according to applicable law.
Additional documents confirming absence of conditions that do not give right to receive the tax rebate may be an excerpt from the State register of real property rights, information from structural units for social protection of regional, Kyiv city district administrations on targeted assistance to cover living expenses, etc.
Question:
Is a father (mother) entitled to reimbursement for the child’s education in domestic preschool institution, out-of-school, general secondary education institution, who actually paid for education, if contract is concluded between the school and child given that payment receipts are issued in the child’s name?
Answer:
Sub-paragraph 166.3.2 Paragraph 166.3 Article 166 of the Code stipulates that taxpayer has right to include in tax rebate in reduction of taxpayer’s taxable income, as a result of reporting tax year determined taking into account provisions of Paragraph 164.6 Article 164 of the Code, actual expenses incurred by him / her during reporting tax year in the amount of funds paid by taxpayer in favor of domestic preschool institution, out-of-school, general secondary, vocational (technical) and higher education to compensate the cost of education of such taxpayer and / or its family member of the first degree of kinship.
Individual’s family members of the first degree of kinship for purposes of Section IV of the Code are her parents, husband or wife, children of such individual, including adopted (Sub-paragraph 14.1.263 Paragraph 14.1 Article 14 of the Code).
Tax rebate includes expenses actually incurred by taxpayer during reporting tax year, confirmed by relevant payment and settlement documents, including receipts, fiscal or commodity checks, profitable cash orders identifying seller of goods (works, services) and individual who applies for the tax rebate (their buyer (recipient), as well as copies of contracts, if any, which must reflect cost of such goods (works, services) and payment term for such goods (works, services) (Sub-paragraph 166.2.1 of the Code).
As follows, norms of the Code stipulate that right to the tax rebate on expenses incurred in reporting (tax) year in favor of domestic preschool institution, out-of-school, general secondary education arises for taxpayer whose payment is actually confirmed by relevant settlement documents, receipts, cash orders, checks, etc. stating that payment for tuition was made directly by individual applying for the tax rebate and copy of contract identifying educational institution – service provider and education seeker-recipient of services (his / her legal representative).
Question:
What is algorithm for the tax rebate calculating in terms of amount of expenses for payment of insurance premiums paid under the long-term life insurance contracts (non-state pension provision)?
Answer:
Sub-paragraph 166.3.2 Paragraph 166.3 Article 166 of the Tax Code of Ukraine (hereinafter – Code) envisages that taxpayer has right to include expenses in the tax rebate amount for payment of insurance premiums (insurance contributions, insurance premiums) and pension contributions paid by taxpayer to the resident insurer, non-state pension fund, banking institution under the long-term life insurance contracts, non-state pension provision, under pension contract with the non-state pension fund, as well as contributions to bank pension deposit account, pension deposits and accounts of participants of banking management funds of such taxpayer and members of his / her family of the first degree of kinship, not exceeding (for each of the full or incomplete months of reporting tax year during which insurance contract was valid):
a) insuring taxpayer or under pension contract with non-state pension fund or on bank pension deposit account, pension deposit, account of participant in banking management fund or a combination thereof –amount specified in First clause of Sub-paragraph 169.4.1 Paragraph 169.4 Article 169 of the Code (in 2020: 2102 UAH x 1.4 = 2940 UAH);
b) insuring taxpayer’s family member of the first degree of kinship or under pension contract with non-state pension fund or on bank pension deposit account, pension deposit, account of participant in banking management fund for benefit of such family member – 50% of amount specified in the First clause of Sub-paragraph 169.4.1 Paragraph 169.4 Article 169 of the Code, per each insured family member (in 2020: 2102 UAH x 1.4 x 50% = 1470 UAH).
For example, if life insurance contract, which provides for payment of the taxpayer’s insurance payment (insurance contribution, insurance premium) for year in the amount of 16000 UAH began on 14.08.2020 and taxpayer in August 2020 paid insurance payment for year in the amount of 16000 UAH (from 14.08.2020 to 13.08.2021), then taking into account norms of Sub-clause “a” of Sub-paragraph 166.3.5 of the Code, the taxpayer has right to deduct amount of actual expenses for 5 months of contract in the reporting tax year 2020, which does not exceed 14700 UAH (2940 UAH x 5 months).
Insuring taxpayer’s family member of the first degree of kinship under the above-mentioned conditions of incurred expenses, the taxpayer has right to deduct amount not exceeding 14700 UAH (2940 UAH x 5 months x 50%).
Norms of the Code stipulate that taxpayer has right to include expenses actually incurred by him / her during the reporting tax year in tax rebate, in particular, expenses for payment of insurance premiums (insurance contributions, insurance premiums), which should not exceed limits set in Sub-clause “a” and “b” of Sub-paragraph 166.3.5 Paragraph 166.3 166 of the Code, calculated for each of the full or incomplete months of the reporting tax year during which insurance contract was valid.
Question:
Is a taxpayer entitled to include part of interest amount in the tax rebate on a mortgage loan paid for reporting year, if object of residential mortgage, defined by him / her as the main place of residence is not from the beginning of reporting year?
Answer:
Sub-paragraph 166.3.1 Paragraph 166.3 Article 166 of the Tax Code of Ukraine (hereinafter – Code) stipulates that taxpayer – resident has right to include part of interest amount in the tax rebate on a mortgage loan provided to the borrower in national or foreign currencies actually paid during reporting tax year.
This right arises if a residential building (apartment, room) determined or paid by taxpayer as the main place of residence is built or purchased at the expense of a mortgage loan, in particular according to mark in the registration passport at location of such housing.
Sub-paragraph 166.2.1 Paragraph 166.3 Article 166 of the Code envisages that the tax rebate includes expenses actually incurred by taxpayer during the reporting tax year, confirmed by relevant payment and settlement documents, in particular, receipts, fiscal or commodity checks, profitable cash orders identifying seller of goods (works, services) and individual applying for tax rebate (their buyer (recipient), as well as copies of contracts, if any, which must reflect cost of such goods (works, services) and payment term for such goods (works, services).
Paragraph 175.4 Article 175 of the Code stipulates that right to include amount in the tax rebate calculated according to Article 175 of the Code is provided to taxpayer on one mortgage loan for 10 consecutive calendar years, starting from the year when:
object of residential mortgage is purchased;
constructed residential mortgage object becomes the taxpayer’s property and begins to be used as the main place of residence.
It should be noted that Paragraph 175.2 Article 175 of the Code envisages that if the house (apartment, room) is built on a mortgage loan, part of the interest amount included in the tax rebate of taxpayer – borrower of mortgage loan, accrued in the first year of repayment of such loan may be included in the tax rebate according to results of the reporting tax year, when constructed residential mortgage object becomes the taxpayer’s property and begins to be used as the main place of residence, with consistent transfer of right to include in the tax rebate the following annual amounts of interest actually paid by the taxpayer during period provided for in Paragraph 175.4 Article 175 of the Code of validity of right to include part of such interest in the tax rebate.
Given above specified, individual has right to include expenses in the tax rebate for reporting tax year, when constructed residential mortgage object becomes the taxpayer’s property and begins to be used as the main place of residence, for payment of part of interest amount on a mortgage loan paid for such reporting year and part of interest amount paid for the first year of repayment of mortgage loan with successive transfer of right to include in the tax rebate the following annual amounts of interest actually paid by the taxpayer for 10 consecutive calendar years.
Question:
Where is it possible to find list of goods (including medicines, medical devices, etc.) purchased in order to prevent spread of the coronavirus disease in Ukraine (COVID-19) cost of which is included in the tax rebate?
Answer:
List of goods cost of which according to Paragraph 11 Sub-section 1 Section XX “Transitional Provisions” of the Tax Code of Ukraine (hereinafter – Code), is included in the tax rebate in full without taking into account restrictions specified in Sub-paragraph 166.3.2 Paragraph 166.3 Article 166 of the Code, was approved by Resolution of the Cabinet of Ministers of Ukraine as of 09.12.2020№ 1319 “Some issues of implementation of Paragraph 11 of Sub-section 1, Paragraphs 51-1 and 51-2 of Sub-section 4 Section XX “Transitional Provisions of the Tax Code of Ukraine”.
Question:
Is it possible by the end of 2020 to use right to the tax rebate on expenses incurred for payment of treatment services on the basis of Sub-paragraph 166.3.4 Paragraph 166.3 Article 166 of the Tax Code of Ukraine?
Answer:
Paragraph 1 Section XIX of the Tax code of Ukraine (hereinafter – Code) stipulates that Sub-paragraph 166.3.4 Paragraph 166.3 Article 166 of the Code enters into force on January 1 of the year following year when the law on obligatory state social health insurance enters into force.
As of 01.01.2021, the law on obligatory state social health insurance has not entered into force, therefore the tax rebate on expenses incurred by taxpayer in favor of health care institutions to compensate expenses for paid services for treatment of such taxpayer or family member of the first degree of kinship (Sub-paragraph 166.3.4 Paragraph 166.3 Article 166 of the Code) is not provided to taxpayers following results of 2020.
