The Ukrainian parliament has kept insurance companies under taxation of gross income, amending Article 156 of the Tax Code regarding the specifics of taxation of insurance companies, according to which a 3% tax is accrued on gross income from insurance operations.
The law on amendments to the Tax Code of Ukraine on the conducting
checks of operations of individual businessmen in connection with the
stoppage of operations under a declarative principle was passed on
October 2, 2012 by parliament.
The document also considerably expands the list of revenues that are
to be taxed, such as: apart from insurance payments, investment income
from the placement of funds for life insurance, sums of bonuses issued
to insurance companies, revenues from the sale of regress claims in
excess of paid insurance claims, accrued interest from deposited
premiums, sums of fines, sums of bonuses to insurers for the provision
of intermediary services, and bonuses paid by reinsurers under
reinsurance agreements.
As for long-term life insurance, its taxation is retained at 0% of gross income.
As reported, the initiator of the draft law was the Cabinet of Ministers of Ukraine.
The key reason of the decision to leave taxation of insurers from
gross income were the results of the operation of the insurance market
over the past year. President of the League of Insurance Organizations
of Ukraine (LIOU), Natalia Hudyma, said that in Q2-Q4, 2011, the market
made a profit of Hr 1.484 billion. The difference between tax
liabilities on gross income and on profit was small. However, in Q1-Q2,
2012 the market saw Hr 29.137 million in profit. This means that the
market paid around Hr 350 million in tax on gross income, while if the
general taxation system existed, the market would have paid only UAH 88
million.
Hudyma said that it would be more profitable for insurers to have
profit taxation, while the market had become used to working with
taxation of gross income – this system has simple payments of tax
liabilities and there is no need to confirm gross expenses.
