AUB proposes to amend the Tax Code regarding the implementation by banks of functions of tax agents

The Association of Ukrainian Banks appealed to the leadership of the National Bank of Ukraine and the parliamentary committees on finance, banking, tax and customs policies to support the proposed bank proposal to amend the Tax Code of Ukraine. As noted in the AUB, initiating the changes caused by the ambiguous interpretation of existing norms of NK Ukraine on taxation of insurance benefits to an individual, if they get sent right beneficiary. According to experts AUB, now prevalent is the practice of life insurance an individual borrower or property that he owns, on the terms on which the beneficiary on insurance contracts is a bank. Further, such funds are to repay debts of an individual, the borrower under the loan agreement. Current standards allow Ukraine NC interpret the rules of taxation of insurance compensation in such a way that the payments under the contract of insurance is not included in the total (monthly) income tax only on condition if they received such a taxpayer. However, if the beneficiary receives payments - the bank and immediately forward them to repay debts of an individual taxpayer, it may be regarded by tax authorities as providing an additional benefit of an individual (in the form of the loan, interest, etc.) with the appropriate retention from the amount of income tax payments. In AUB believe that this situation does not meet the basic principles of taxation, since for the same type of income may different taxation of the same individual, depending only on implementation technology of the insurance contract when it is essentially unchanged (subject to insurance risks of a natural person, means directed to repay the debt / needs of the individual). Given this AUB proposed changes to st.165 Sec. 4 of the Tax Code, and include them in the bill on 3/12/2011, the N8217, which was adopted by the Verkhovna Rada of Ukraine in the first reading 19.04.2011 r. In particular, AUB offers in subparagraph 165.1.27 to provide that the total monthly (annual) taxable income of the taxpayer does not include the amount of insurance payment, insurance reimbursement or redemption charges accrued and received by the taxpayer or a designated third party (including the beneficiary - a financial institution, subject to the direction of the insurance claim, the redemption amount in full on the repayment indebtedness of the taxpayer to the banking institution). AUB also offers this item to add clarification that the financial institution, as defined by the taxpayer as a beneficiary under an insurance contract is not his tax agent and, accordingly, does not perform in relation to income (as described in paragraph 165.1.27) the function of a tax agent if they meet the relevant conditions. In AUB note that the final settlement of tax matters on such transactions on the one hand, will promote further development of retail lending, reduced borrowing costs by reducing the risk of operations and growth of the insurance market, on the other hand - have a positive impact on the quality of banks' loan portfolios and hence the financial performance of their activities.