Ministry of Finance of Ukraine cancels its Regulation on tax differences

With this Letter the State Tax Administration of Ukraine (STA) suggests the Ministry of Finance of Ukraine (MFU) to consider the possibility of cancellation of its following Orders:

• Order of the MFI “On Approval of Regulation on Procedure of Tax Differences Calculation in Financial Accounting” No. 1316 of December 29, 2006;
• Order of the MFI “On Approval of Guiding Recommendations on Compiling of Accounting Registers of Tax Differences, Taxable Revenues and Deductible Expenses” No. 45 of January 29, 2007.

The STA indicates that approval of these normative acts has actually introduced the new type of statutory accounting for taxpayers that significantly increases the scope of accounting work instead of making tax accounting easier. Additional accounting information to be generated by the taxpayers under these orders has no practical application when conducting documentary tax audits of legal entities – payers of corporation tax.

The STA also believes that cancellation of the orders on tax differences will allow to reduce the amount of time needed for taxpayers to comply with the tax legislation, strengthen the position of Ukraine in the World Rating “Tax Charge” and will not result in tax collections drop for the State Budget.

Consequently the MFU has cancelled its Orders indeed which were about to introduce the additional statutory reporting form #7.

Despite of understandable intention of the MFU to get to order the calculation of deferred tax for the purposes of financial reporting, the proposed format has fairly caused a lot of questions. Its preparation, in essence, would have meant the organization of separate cumulative accounting registers that complicates the accounting process heavily.

At the same time, NAS 17 “Corporate Tax” still requires to define the impact of temporary differences on financial result. However, the format of calculation of such impact is now up to the management again.