Source: Dagda LLC

http://dagda.com.ua/content/userfiles/pdf/researcn_prez/GoldRes_DAGDA_rus.pdf

The transactions with gold and other investment assets on the territory of Ukraine require specific tax application from those who are in charge of such transactions.

From the point of taxation, transactions with banking metals and investment assets are regulated by the Law of Ukraine “On income tax from individuals” (“Law on income tax from individuals”). At the same time such transactions are taxed in accordance with separate (special) rules, stipulated by paragraph 9.6 of Article 9 of the Law on income tax from individuals. The basis for taxation is a positive difference between the selling and acquisition prices of an investment asset. The difference is defined as the summarization of such transactions at the end of the calendar year, in which they occur (together with other investment assets (securities or corporate rights). With that, the total of positive differences is decreased by the total of negative differences from transactions with such (or any other investment) assets being available.

Therefore, investment assets acquisition takes no consequences, but with the above mentioned, we advise the individuals who purchase banking metals, preserve all price proving documents of such purchase. The reason for this, is that after the selling, the income from investment assets alienation purchased in the form of banking metals with the aim of taxation, is decreased by the expenses on the acquisition.

When purchasing precious metals, individuals should remember:

1) The mentioned procedure is applied only to banking metals, purchased in a bank, irrespective of their further point-of-sales. Hence, the taxation issue on further transactions on purchasing and selling of banking metals is clearly regulated by the Law of Ukraine “On income tax from individuals” only in the part of transactions, which are carried out through a fiscal agent, i.e. a legal entity, sole proprietor, as well as through notaries, who are obliged to report tax authorities about income payments to individuals.

2) The first point is proved by the fact, that transactions record shall be kept by a citizen-payer himself (apart from other incomes) or through an authorized representative. 

3) Banking metals, received by a way of a gift or legacy, are of zero acquisition cost for income taxation after selling. By this, acquisition costs of grantor are not considered to be investment losses for the purpose of taxation, which decreases positive difference from transactions with any other investment assets of a grantor or legator.

4) If negative differences over a fiscal (calendar) exceed positive differences from transactions on selling investment assets, then such taxable losses are carried forward to further years until reimbursed with the respect to future transactions on any investment assets selling, including banking metals.

 5) The exceeding of positive differences by negative over a fiscal (calendar) year is included to annual taxable income of acitizen individual and is liable to tax at 15% rate of such annual income as a result of self-declaring.

 Thus, the individual, carrying out transactions on selling banking metals through the fiscal agent, is obliged, not later then by 1 April of the next fiscal year, to submit a tax declaration to a tax inspectorate for the fiscal year.  The declaration shall contain the annual investment result (taxable profit\losses) from transactions with banking metals, as well as from other investment assets, on condition that the latter are carried out.

 If a tax liability for a payment is defined as the result of annual self-declaration, a tax incorporate forwards a tax notification-decision to the individual‘s registered domiciliary with a sum of income to be paid in the course of the next 30 calendar days, after the date of receiving the tax notification-decision. The tax payment could be carried out in any banking institution where budget payments are made.

 In conclusion, it is worth giving some practical advice for individuals, who plan purchasing\selling banking metals in significant volumes:

1.   Any purchase of banking metals, in particular in banking institutions, shall be documentary certified for a price confirmation on condition of further possible alienation.

2.  In case of banking metals selling, draw your attention to: 1)the buyer, purchasing from you; 2) the information the buyer demands from you.

 3. In case your buyer is the fiscal agent, make sure it hasn’t retained from you an income tax from individuals on income paid to you. Also you should get price proving documents (according to the Law on   income tax from individuals” it is only your responsibility or your authorized person (for example, the tax inspectorate of your registered  domiciliary) to declare results of transactions with banking metals over a fiscal (calendar) year, and in case of a tax obligation determination, you shall pay it on the basis of tax notification-decision received from your tax incorporate.

Taras Koval, counsel for PARITET law firm