On calculation procedure and filling out tax reporting on tax obligations from rent for the subsoil use for extraction of minerals for taxation object that was taxed in the previous reporting period, which as a result of application of primary processing processes in the reporting tax period acquired new form of commodity products
Payers of rent for the subsoil use for extraction of minerals (hereinafter – Rent) are business entities, including citizens of Ukraine, foreigners and stateless persons, registered according to the law as entrepreneurs who have acquired right to use the subsoil object (area) on the basis of received special permits for the subsoil use within limits of specific subsoil areas (hereinafter – Area) for conduction of economic activities for extraction of minerals, including during geological study (or geological study with subsequent research and industrial development) within limits of the subsoil objects (areas) specified in such special permits (Sub-paragraph 252.1.1 Paragraph 252.1 Article 252 of the Tax Code of Ukraine (hereinafter – Code).
Rent taxation object on each plot provided for use, which is defined in relevant special permit, is volume of commodity products of the mining enterprise – extracted mineral (mineral raw material), which is a result of economic activity of extracting minerals in the tax (reporting) period, types of which are established by the conditions for mineral raw materials of the subsoil object (area) to which they belong, including volume of commodity products of the mining enterprise – mined mineral (mineral raw material), which is a result of economic activity for extraction of minerals from the subsoil in the territory of Ukraine , its continental shelf and exclusive (marine) economic zone, including amount of mineral raw materials formed as a result of primary processing carried out by business entities other than the Rent payer under terms of business contracts for services with raw materials suppliers (Sub-paragraph 252.3.1 Paragraph 252.3 Article 252 of the Code).
Economic activity of the mining enterprise for extraction of minerals is activity of the mining enterprise, which includes processes of extraction and primary processing of minerals (Sub-paragraph 14.1.37 Paragraph 14.1 Article 14 of the Code).
Extraction of minerals is defined as a set of technological operations of extraction, in particular from deposits of the bottom of reservoirs, and transfer, including temporary storage to the subsoil surface of a part of the subsoil (rocks, ore raw materials, etc.), which contains minerals and special types of mining operations of minerals, which includes underground gasification and smelting, chemical and bacterial leaching, dredging and hydraulic development of placer deposits, hydraulic transport of mining rocks of reservoir bottom deposits (Sub-paragraph 14.1.51 Paragraph 14.1 Article 14 of the Code).
Primary processing (enrichment) of mineral raw materials, as a type of economic activity of the mining enterprise, includes a set of operations with: collection, crushing or grinding, drying, sorting according to any physical properties of crushed or ground rocks or mineral formations using any technological processes sorting, which ensure that the mining enterprise receives commodity products, types of which are established by the approved conditions for mineral raw materials of the subsoil object (area) (Sub-paragraph 14.1.150 Paragraph 14.1 Article 14 of the Code).
As a result of economic activity of the mining enterprise, both as a result of extraction operations and stage of primary processing, numerous types of commodity products of the mining enterprise, properties of which are able to satisfy target consumer requirements, may be formed, provided for in the Conditions.
Mining enterprises, compiling Conditions, independently make decisions about the composition and structure of types of commodity products that will be produced by the enterprise. Herewith, there may be cases when commodity products formed in the extraction process and tax obligations for which have been fulfilled in the corresponding reporting period, will be subject to further operations of primary processing with formation in subsequent tax periods of commodity products with consumer with properties different from the declared (hereinafter – New products).
Possibility for taxpayers to fulfill determination of tax obligations from Rent for transformed commodity products, which will be sold with new consumer properties, different from the declared ones, is provided for in Clause 2 of Paragraph 252.14 Article 252 of the Code.
There is a conditional example of tax reporting and filling out tax declaration forms from Rent for a situation where taxation object or part of it, which was taxed in the previous reporting period, acquired new form of commodity products as a result of use of primary processing processes in the reporting tax period.
Tax obligations from Rent in each tax (reporting) period corresponding to the calendar quarter are declared in Annex 1 to the Tax declaration on rent payment (hereinafter – Calculation), approved by Order of the Ministry of Finance of Ukraine No. 719 as of 17.08.2015 (in edition of Order of the Ministry of Finance of Ukraine No. 927as of 07.11.2016) (hereinafter – Declaration).
Calculated in the reporting tax (reporting) period of one or more types of New products is identified in lines of section 8 of the Calculation in separate annexes for each such type.
Section 8 "Type of mineral" of the Calculation reflects information about the mined mineral, including description of New products in lines 8.3-8.5 of the Calculation, which are filled in using notes 12-15 of such Calculation.
Conditional example
Mining enterprise (hereinafter – Enterprise) took into accounting 270.1 tons of energy hard coal of the G(G2) (0-200) grade according to results of economic activity of mineral extraction in the 4th quarter of 2022 (hereinafter – Previous period) (hereinafter – Energetic coal).
Tax obligations for the Previous period are declared using calculated according to Paragraph 252.16 Article 252 of the Estimated Value Code, the Energetic coal as a taxation Rent base in the amount of 7 397.60 UAH per ton, rate of 0.75 percent of the value of energetic coal and adjustment factor of 0.95. Amount (see Table 1 of example) of timely fulfilled tax obligations of the Previous period amounted to:
270.1 tons × 7 397.60 UAH/ton × 0.75% ×0.95 = 14,236.40 UAH;
According to results of economic activity in the extraction of minerals in the 1st quarter of 2023 (hereinafter – Current period), the Enterprise took into accounting 1 800 tons of the Energetic coal.
According to results of economic activity of primary processing of the Energetic coal mined in Previous and Current periods, from 2 070.1 tons of mined Energetic coal, New products in the form of coal concentrate G(G2)(3-6) in the amount of 1 830 tons were obtained.
Rent tax obligations for mined coal concentrate G(G2)(3-6) are calculated based on the Rent taxation base in the amount of 14 201 UAH per ton – actual sale price, in the amount of 185 163.29 UAH (see Table 2 of example):
1 830 tons × 14 201 UAH /ton × 0.75% × 0.95 = 185 163.29 UAH.
In addition, in order to ensure clarification of the Rent tax obligation for the Rent taxation object declared in the Previous period – coal, which, as a result of primary processing, was taken into accounting as a coal concentrate, a separate annex has to be compiled with reduction in the amount of tax liability fulfilled for the Previous period from Rent (see Table 3 of example).