Amendments to Single Social Contribution Holidays Regime

Avellum Partners, Kyiv, Ukraine
Wed, March 18, 2015

On 2 March 2015 the Verkhovna Rada ofUkraine adopted the Law of Ukraine “On Amending Section VIII “TransitionalProvisions” of the Law of Ukraine “On Collection and Accounting of the SingleSocial Contribution” on decrease of burden on the payroll” No. 219-VIII (“Law”).

The Law amends special measures forlegalisation of salaries introduced into Ukrainian legislation by the Law ofUkraine “On Amendments to the Certain Legislative Acts of Ukraine RegardingReformation of Compulsory State Social Insurance and Legalisation of Payroll”No 77-VIII, dated 28 December 2014 adopted in the course of the Tax Reform(please refer to our legalalert dated 12 January 2015 for moreinformation).

The Law, in particular, amends thecriteria for applying coefficients for the Single Social Contribution (“SSC”)rates. To be eligible for application of the coefficient the SSC payer mustcomply with all of the following criteria:

·                    Monthly SSC base per person wasincreased as compared to average monthly SSC base per person in 2014 for notless than 20%

·                    If the coefficient applies, theaverage amount of SSC payable per person is not lower than the average SSC perperson paid in 2014

·                    Number of employees does not exceed200% of the number of employees in 2014

Amendment of the criteria is aimed atstimulating application of the preference by SSC payers, which legalise atleast 20% of payroll, and, at the same time, at preventing its application bythose SSC payers, which in 2014 engaged large number of unrecorded employees.It also prevents abuse of the regime by transfer of employees from differententities to one employer.

Eligible SSC payers must calculate thecoefficient each reporting month. The coefficient is determined as a ratio ofSSC base amount per person to the average monthly SSC base per person in 2014.If the coefficient is less than 0.4, the USC payer must apply 0.4 coefficient.

Starting from 1 January 2016 all SSCpayers would be entitled to 0.6 coefficient regardless of the criteria.

Ordinary single social contribution rates remain unchanged.Maximum amount taxable with the SSC remains unchanged (at 17 living minimums).

Additionalnotes

For further information on thetopic please contact Mykola Stetsenko, Managing Partner, GlibBondar, Partner, andKostiantyn Likarchuk, Partner, or by telephone +38044 220-0335 or via e-mail.

The LEGAL ALERTS are issuedto inform Avellum Partners clients and other interested parties oftime-sensitive legal developments that may affect or otherwise be of specialinterest to them. The comments above do not constitute legal advice or opinion,and should not be regarded as a substitute for detailed advice in individualcases.