Income and expenses in the Tax Codes of Ukraine and Russia: advantages and disadvantages

УДК 657

Штанько Є.О., к.е.н. доц. Лєгостаєва О.О., к.п.н. доц. Ріхтер О.Є.

Харківський інститут банківської справи УБС НБУ

Income and expenses in the Tax Codes of Ukraine and Russia: advantages and disadvantages

Abstract. The article analyzes and compares the statements of Tax Codes of Ukraine and the Russian Federation in the definition of income and expenses for taxation of business profits, identifies areas of borrowing experience.

Keywords: tax on the profit, the object of taxation, income, expenses.

Newly adopted Tax Code of Ukraine aims to eliminate the problem of separation of tax accounting from the bookkeeping. Due to the fact that Ukraine and Russia came from one system of the USSR, conditions of organizational support for enterprises in these countries is similar. This caused the Russian Tax Code to be chosen for comparison with the Tax Code of Ukraine.

The aim of research is to compare the Tax Code of Ukraine and the Tax Code of Russian Federation concerning determination of income and expenses for tax on the profit of organization in order to identify possible areas of borrowing experience.

The basic material. In Ukraine the main document which regulates the procedure of tax on the profit calculation and payment for enterprises and organizations, is the Tax Code of Ukraine [1]. In the Russian Federation the taxation of profit of enterprises and organizations is subjected to Chapter 25 of Part II of the Tax Code of the Russian Federation [2].

It should be noted that the study of the taxation of corporate profit should begin with a definition of tax on the profit. But there is not definition of this concept neither in Ukrainian Tax Code, nor in the Russian one. That’s why, we should apply to determine the object of taxation in order to understand the notice «Tax on the profit of organizations». (Table 1)

From the table it is obvious, that the object of tax on the profit taxation under TC of Ukraine and TC of Russia is an income of a fiscal period reduced by the amount of expenses incurred in the fiscal period, taking in account the classification of income and expenses specified in the relevant tax code.

Table 1

The object of taxation for tax on the profit of organizations

Art. 134 of TC of Ukraine

Art. 247 of TC of the Russian Federation

The object of taxation is:

- profit originating from Ukraine or from abroad, which is determined the amount of income in a fiscal period, identified in accordance with Articles 135-137 of the Code, reduced by the cost of production of goods sold, work performed, services rendered and other expenses in a fiscal period identified according to Articles 138-143 of the Code, taking into account rules established by Article 152 of the Code

The object of taxation is a profit earned by a taxpayer. For the purposes of this chapter profit includes:

- Received income, reduced by the amount of expenses incurred that are determined in accordance with the Code;

- for foreign organizations performing an activity in the Russian Federation through permanent representations - incomes received through these permanent representations, reduced by the amount of the expenses made by these permanent representations which are defined in conformity with this Code

According to the Article 135 TC of Ukraine income is divided into «income from operations» and «other income», according to TC of Russian: the «income from the sale of goods (work and services) and property rights» and «non-sale income». In Table 2 we show that the Ukrainian «income from operations» and Russian «income from the sale of goods (work and services) and property rights» are identical. However, this can’t be said about «other» and «non-sale» income.

Table 2

Classification of income that are accounted when calculating an object of taxation

Country

Article Code

Income

Ukraine

Art.135.

Income consists of:

- Income from operations (income from sale of goods, works performed, services rendered, including compensation of commissioner (assignee, agent, etc.);

- Other income

Russian Federation

Art. 248

Income includes:

- Income from the sale of goods (work and services) and property rights (receipts from the sale of goods (works, services) as its own production, and previously purchased, receipts from sale of property rights)

-.Non-sale income

Both codes are taken to such income: income from the leasing (subleasing) of assets (including land), income in the form of amounts payable, written off because of the expiration of the limitation period, previous year income which was discovered in the reporting (tax) period, cost of goods, works and services received free of charge by a taxpayer in the reporting (tax) period.

In Ukraine all income of organizations is imposed with tax on the profit. But, comparing the list of income, which is taken into account in determining the object of taxation in Ukrainian Tax Code and in the Russian one, we can conclude that our legislation does not observe many cases, (types of income) which in practice are taken into account and belong to «other». That’s why, we consider the addition of the list of income that is taken into account while determining the object of taxation to be appropriate.

According to the Law of Ukraine «On Taxation of Corporate Profits», that acted before the introduction of the Tax Code, prepayment for goods, works performed, services rendered were included to the income of the fiscal period [3]. According to the Tax Code advance payments don’t belongs to the income of fiscal period any more. Certainly it is economically more correct to count income by fact of their occurrence, rather than prepayment.

It should be noted that in Russia there are 2 methods of determining taxable profit – the calculation method, by which income and expenses are recognized in the period in which they were made, irrespective by of the actual cash flow, and also the cash method, by which income and expenses are recognized by the date of cash receipt or outflow. The last method may be used only by enterprises in which the sum of income from the sale does not exceed 1 million rubles in every quarter for the previous four quarters [2]. If the company uses the calculation method, the income from the sale believed to be received in the period when the company was granted the right to obtain it (by date of transfer the ownership of goods to buyer). It does not matter when the company receives payment.

Another integral part in determining tax on the profit of organization is its expenses. According to Article 138 TC of Ukraine expenses that are considered while determining the object of taxation are classified in «operating costs» (the cost of goods sold and others) and «other expenses»

According to Article 252 TC of Russia expenses are divided to «expenses associated with production and sales» and «non-sale expenses». (Table 3)

Table 3

Classification of expenses taken into account in determining the object of taxation and their composition

Country	Name of expenses	Composition of expenses
Ukraine	Operating costs (the cost of goods sold and others)	- Direct material costs; - Direct labor costs; - Depreciation of production assets and intangible assets directly related to the production of goods, works, services; - General expenses of production related to the cost of goods made, work performed and services provided in accordance with the regulations (standards) of accountancy; - The cost of purchased services directly related to production of goods, performance of works and provision of services; - Other direct costs inclusive those relating to purchase of electric power (including reactive one).
	Other expenses	- Administrative expenses - Distribution expenses, - Other operating expenses - Financial expenses, - Other expenses on ordinary activities.
Russia	Expenses associated with production and sales	- Material expenses, - Labor payment expenses, - Amount of amortization charged, - Other expenses
	Non-sale expenses	-

From the table it is obvious, that according either to the Ukrainian or to the Russian tax codes, the expenses primarily include expenses associated with production and sales, which in Russia are called «expenses associated with production and sales» and in Ukraine -«operating costs». These include material expenses (for purchasing raw materials, etc.), labor expenses, amount of amortization, accrued for the relevant fiscal period, and other expenses.

In order to approach tax accounting and bookkeeping, the authors of Ukrainian Tax Code carried to the «other expenses» expenses that are not directly related to production expenses. In particular: administrative expenses, distribution expenses, other operating expenses, financial expenses, other expenses on ordinary activities [1]. Comparing the specific items of expenses in the Russian tax legislation and in the Ukrainian one, we conclude that such expenses which in Ukraine distinguish as administrative and distribution ones are included to the «other expenses associated with production and sales» in the Russian Federation. That is the cost of management of the organization; for postal, telephone needs, fees for consulting, information, audit services, the cost of packing materials and others.

Russian «non-sale expenses» includes the cost that TC of Ukraine classifies as «other operating» and «financial» expenses: costs for transactions in foreign currency, exchange losses; interest expenses (for use of credits and loans, for bonds); expenses for the maintenance of assets transferred under a rental contract, etc. Certainly, articles of the Tax Code of the Russian Federation contain more complete list of expense items that allow taxpayer of tax on the profit to include the expenses of a reporting period to determine the object of taxation.

The positive moment in Ukrainian tax legislation, in our opinion, is that fact that in order to approach tax accounting and bookkeeping concerning tax on the profit of organizations the expenses are identified by their types (administrative, financial, distribution expenses, etc.) as it is in bookkeeping.

Tax period for tax on the profit in both countries is the calendar year, fiscal periods are quarter, half-year and three quarters. A statement for tax on the profit in Russia and Ukraine is a tax declaration for tax on the profit, which is filled in by increasing result and submitted each quarter.

Summarizing the said above it should be noted that the Russian Tax Code has been acting since 2000, i.e. already for 11 years, while in Ukraine the new taxation rules for tax on the profit have come into force only this year. Besides, there are more detailed items of income and expenses that may be considered to determine the object of taxation of tax on the profit in TC of Russia. This fact can significantly reduce the number of contentious or controversial cases. Another feature of tax legislation in Russia is the using two methods of determining the taxable profit: calculation method and cash method (only for companies in which the sum of income from the sale does not exceed 1 million rubles in every quarter for the previous four quarters). According to a new TC of Ukraine, enterprises can use only the calculation method, irrespective of the receipt date payments for goods or services. The presence of identification expenses for their types (administrative, financial, etc.) as well as it is done in bookkeeping can be also noted as a positive fact in the TC of Ukraine.

Conclusions. Having compared the Tax Codes of Ukraine and the Russian Federation in the definition of income and expenses for taxation of corporate profit, we consider the selection of such areas of borrowing experience to be of importance:

- Expanding the list of components that are included to income that is taken into account in determining the object of taxation;

- Adding the classification of income in the Tax Code of Ukraine on financial income, other operating, extraordinary income in order to maximize rapprochement with bookkeeping;

- Expanding the list of expense items that are taken into account or not taken into account in determining the object of taxation of tax on the profit.

The suggested will promote the rapprochement of tax accounting and bookkeeping concerning determination and calculation income and expenses for determining the corporate profit tax.

List of sources used:

1. Податковий кодекс України № 2755-VI від 02.12.2010 р. зі змінами і доповненнями – режим доступу: http://zakon2.rada.gov.ua/laws/show/2755-17

2. Податковий кодекс Російської Федерації: частина друга N 117-ФЗ від 05.09.2000 р. зі змінами і доповненнями – режим доступу : http://www.interlaw.ru/law/docs/10800200-089.htm#20025

3. Закон України «Про оподаткування прибутку підприємств», Верховна Рада України, від 22.05.1997р № 283/97-ВР зі змінами і доповненнями. – Режим доступу: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=334%2F94-%E2%F0

4. Положення (стандарт) бухгалтерського обліку 15 "Дохід", затв. Наказом Міністерства фінансів України від 29.11. 99 р. № 290.- Режим доступу: http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?nreg=z0860-99