To the attention of the single tax payers of Group III – legal entities!

With entry into force of the Law of Ukraine №1089-IX as of 16.12.2020 "On electronic communications" (hereinafter – Law №1089), taxpayers – legal entities who provide electronic communication services do not have a right to apply the simplified taxation system, accounting and reporting.

Paragraph 291.5 Article 291 of the Tax Code of Ukraine (hereinafter – Code) defines list of activity types, implementation of which does not give a right to apply the simplified taxation system, accounting and reporting.

Sub-paragraph 8 of Sub-paragraph 291.5.1 Paragraph 291.5 Article 291 of the Code stipulates that may not be the single tax payers of Groups I – III entities, including legal entities that carry out provision of mail services (except courier activities), activities for provision of fixed services telephone communication with a right to maintain and operate telecommunication networks and provide telecommunication channels (local, long-distance, international) for use, provision of fixed telephone communication services using wireless access to the telecommunications network with a right of technical maintenance and provision of telecommunication channels (local, long-distance, international), provision of mobile (cellphone) telephone services with a right to maintenance and operation of telecommunication networks and provision of telecommunication channels for use, provision of services for maintenance and operation of telecommunication networks, broadcast television and radio broadcasting networks, wire radio broadcasting and television networks.

That is, a ban on staying on the simplified taxation system applies to business entities – legal entities that, as a part of provision of services in electronic communications sphere, perform maintenance and operation of relevant networks, including providing access to such networks.

Law №1089 stipulates that operator is the supplier in provision of electronic communication services. Provider of electronic communication services is the business entity that provides and/or has a right to provide electronic communication services on its own networks and/or on networks of other providers of electronic communication services.

In contrast to previous, the Law of Ukraine №1280-IV as of 18.11.2003 "On telecommunications" (was valid until 01.01.2022) separated these concepts and separately defined concept of "telecommunications provider" (business entity that has a right to activities in the of telecommunications sphere without a right to maintenance and operation of telecommunication networks and provision of telecommunication channels).

At the same time, to apply the simplified taxation system, taxpayers submit application using form approved by Order of the Ministry of Finance of Ukraine №308 as of 16.07.2019 and registered in the Ministry of Justice of Ukraine on 24.09.2019 under №1054/34025. Form of this application provides for the taxpayers to indicate activity types according to the codes of Classification of Economic Activity Types of the State Classifier 009:2010, which the business entity should carry out while on being the simplified taxation system.

Classification of Economic Activity Types of the State Classifier 2010 was approved by Order of the State Statistics Committee of Ukraine on 23.12.2011 under №396. This Order defines methodological bases and explanations for positions of Classification of Economic Activity Types of the State Classifier 2010. According to it, activity of providing Internet access services does not belong to a separate class or subclass of types of economic activity, but is a component of class 61.10 "Activities in the wired telecommunications sphere" and class 61.90 "Other activities in the electronic communications sphere".

Therefore, legal entities that submit application for registration as the single tax payer of Group III with indication of Classification of Economic Activity Types of the State Classifier class 61.10 "Activities in the wired telecommunications sphere" and class 61.90 "Other activities in the telecommunications sphere" currently do not have a right to apply the simplified taxation system.

Ministry of Finance of Ukraine supported position of the State Tax Service.

At the same time, it should be noted that the single tax payers – legal entities are obliged to switch to paying other taxes and levies specified by the Code, in the case of activities that do not give a right to apply the simplified taxation system, from the first day of month following tax (reporting) period in which such activities were carried out.

Also, registration of the legal entity as the single tax payer can be canceled by exclusion from Register of the single tax payers by decision of the controlling body.

Herewith, it should be emphasized that cancellation of the single tax payer of Group III – legal entity from Register of the single tax payers occurs only in the case that such business entity performs prohibited types of economic activity.