Taxation

Taxation in relation to investment funds

The Law of Ukraine «On enterprise profit taxation», article 4, clause 4.2.8. runs, that the means of co-investment, in particular, funds attracted from investors by institutes of co-investment (ICI), revenues from transactions involving ICI assets and revenues accrued on ICI assets are not included into gross revenues of ICI.

So, investment funds are freed from tax payment.

Taxation of individuals

If an investor of interval or closed investment fund disposes of (sells) the shares of the fund to third parties, the investment income, received from the sale of such securities is taxed at the rate of 15%.

Investment income is a positive difference between the revenues, received from the sale of securities of the fund and its costs, calculated taking into account the total expenses, related to the purchase of such securities.

If the securities of the investment fund are transferred to third parties by means of donation or inheritance, the taxation is carried out in the following way:

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if donation involves other parties, the taxation is carried out on terms applied to inheritance;

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if securities of the fund are inherited, such income is taxed according to the degree of kindred;

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if the successors are husband or wife, children (including adopted), parents and parents of husband (wife), the taxation is carried out at the rate of 15%;

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if the successors are other relatives, the tax rate is 15% from the excess amount funds against hundredfold amount of minimum wages.

If the investor is not a resident of Ukraine, then the taxation of income, received from investment into funds, is carried out in accordance with taxation rules for residents.

On January 1, 2005 came into effect The Law of Ukraine «On implementation of changes to the Law of Ukraine «On individuals profit taxation», which introduced changes into taxation of investment income, paid by the company, which manages the assets of such fund.

Taxation of legal entities

Investors may disaffiliate with the investment fund (depending on the fund's type) in two ways:

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by means of selling the securities of the investment fund to the management company or agent, which carries out the repurchase of the investment fund securities;

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by means of selling the securities of the investment fund to third parties.

Taxation of transactions with securities (including the securities of the investment fund) is separated from the taxation of ordinary activities.

Legal entity must maintain separate accounting of transactions with securities in the section of their type (shares, corporate rights, other securities).

As of the reporting date, the company balances the transactions with securities in the section of securities type and forms total gains or losses from such transactions.

The profits or losses for the reporting period are adjusted in accordance with accumulated losses of past periods and form the basis of assessment.

If the company suffers losses, they are not included into gross expenses and are transferred to future periods.

If the company receives profits, they are transferred to the gross income of the legal entity.

Hereafter, the calculation of the profit tax amount is carried out on common terms.