You're reading: Ukraine’s tax complexities keep accountants in work

The past year has seen changes designed to simplify and lower Ukraine’s taxes to spur greater compliance in a nation with a habit of tax dodging.

For Kyiv’s small army of accountants who keep the books of foreign multinationals operating in Ukraine, this has been a boon for business. The corporations, the accountants say, are often unwilling to devote the resources necessary to keeping up with changes in legislation, and instead outsource the work.

“Twenty to 30 percent of our accountants’ time is spent checking new legislative acts,” said Yuri Donets, director of Schneider Group’s Ukraine division.

Schneider Group, a Germany-based firm that does accounting on an outsource basis and compliance work for dozens of clients in Ukraine, keeps the books of companies across the business spectrum.

“We need to pay as close attention as possible,” Donets added. “In regards to all the major tax changes, there are peculiarities. It’s quite easy to say ‘okay you have personal income tax of 18 percent,’ but for our customers, these particularities could really put stress on them.”

Dmitry Belianskiy, head of Mazars Ukraine’s outsourcing department, told the Kyiv Post that his team stays current on ongoing changes in accounting-related rules and legislation.

“From the experience of my accountants, the first thing we do at our workplace is to check the updates,” Belianskiy said.

Different codes

The same trend has hit the Big Four auditors, as well.

“Because now it’s tax filing season, we have even more demand for our services to assist with tax return preparation,” said Yuliya Nykonenko, senior manager of tax and legal services for KPMG Ukraine.

The KPMG manager said that even though part of the country’s accounting procedures have been significantly modernized, many local accountants are struggling to keep up with the changes.

“A very significant change occurred in 2015, where entire principles of tax accounting changed,” Nynonenko said. “Now we have to take statutory accounting numbers and make adjustments. Other European countries and the U.S. have the same approach,” she went on, “where tax return numbers come directly from financial statements.”

She added: “And now many local tax accountants don’t know what to do.”

Nykonenko went on to say that other “significant changes” to the tax code had not been made, and that the law’s complexity had merely changed, instead of being erased.

“They just, I would say, play with numbers, with the tax rate,” she told the Kyiv Post in an interview.

“Today it’s this big, next year its 1 percent higher, 1 percent lower. This year you file tax returns on an annual basis, next year you file on a quarterly basis, (and the) next year you file on an annual basis – it’s complicated, but was it a real change? No. It’s just the same.”

Belianskiy of Mazars echoed Nykonenko’s feelings about the tax code.

“During these tax changes, we see good examples of improvements,” he said. “At the same time it’s definitely not enough, still.”

Advantages, compliance

The challenge of keeping up with Ukraine’s bureaucracy, while a detriment to foreign firms, works to the advantage of companies that work in bookkeeping.

“It’s economies of scale to help with accounting in-house,” said Donets, the Schneider Group director. “Especially for medium and small enterprises, it’s not efficient.”

“Usually, the scale of their operations means that it’s not a full time job for many of these companies,” he added.

Some of Ukraine’s accounting firms are expanding their practices to include anti-corruption compliance.

Part of this has to do with recent and ongoing changes to Ukraine’s anti-bribery laws. The push for an increased focus on compliance is also motivated by more vigorous foreign bribery enforcement in the companies’ home countries.

“What is in demand right now is connected with anti-corruption legislation,” said Donets, the Schneider Group director.

He added that the demand for outsourcing of accounting compliance has spiked, especially with the increase in the transparency of government procurement.

“Many of our clients are thinking about taking part in state tenders and have agreed to compete, so that’s in high demand,” Donets said.

The Schneider Group director added that the new procurement rules “are still quite fresh.”

“But I consider them to be good,” he opined. “And what I see right now, when normal companies start to win tenders, versus some strange private entities, this is a good move.”