The State Tax Service has revealed Order "On approval of a generalized tax clarification on accounting of tax losses in relation to corporate profit tax" No.575 of 5 July 2012 (hereinafter - Order No. 575).

Order No. 575 answers the vital question of if tax losses incurred in 20092010 can be carried-forward to 2-4 quarters 2011 based on the recently adopted Law of Ukraine "On amending the Tax Code of Ukraine in relation to improvement of certain legal norms" No. 4834-IV of 24 May 2012 (known as draft law No. 9661-d hereinafter - Law No.4834).

The tax authorities clarify that Law No.4834 allows losses incurred as a result of activity in 2010 and 2009 (80% of losses that were not deducted in 2010) to be carried forward to 2-4 quarters 2011. Taxpayers that did not carry forward losses to the second, second and third, and second through fourth, quarters 2011 are allowed to adjust their 2011 tax returns from the moment Law No. 4834 took effect. The tax authorities advise adjusting 2011 tax returns prior to filing the corporate profit tax return for the first half of 2012.

Please note that Order No. 575 confirms the taxpayer's right to adjust its tax return for 2-4 quarters 2011 and carry forward losses of 2009-2010 according to the results of an administrative or court dispute with the tax authorities regarding this issue. The tax authority, however, has avoided mentioning how to account such losses if the taxpayer has lost its dispute with the tax authorities.

Contacts at Ernst&Young:

Vladimir Kotenko
+380 (44) 490 3006
Vladimir.Kotenko@ua.ey.com

Jorge Intriago
+380 (44) 490 3003
Jorge.Intriago@ua.ey.com

Igor Chufarov
+380 (44) 492 8231
Igor.Chufarov@ua.ey.com