Draft Law of Ukraine

"On Amendment of Clause 5.9 of Article 5 of the Law of Ukraine "On Enterprise Profit Tax"

The draft envisages that a taxpayer should keep tax accounting of growth (decrease) of book value of goods based upon value determined according to the rules of the national provision (standard) of accounting.

The draft suggests including into the book value of inventory holdings not only material expenditures, but other expenditures paid (calculated) by a taxpayer during the reporting period:

• actual expenditures on purchasing inventory holdings, including general economic and others – related to purchase, delivery and operations on goods to make them suitable for use;
• expenditures on manufacture of finished products, making up their production cost.

The draft determines that in cases when a taxpayer has growth of inventory holdings or vice versa – decrease thereof, rules determined by clause 5.9 of Article 5 of the Law of Ukraine "On Enterprise Profit Tax" shall apply, namely:

• when book value of inventory holdings by the end of a reporting period exceeds their book value at the beginning of the same reporting period, the difference is to be added to gross revenues;
• when book value of inventory holdings by the end of a reporting period is lower than their book value at the beginning of the same reporting period, the difference is to be included into gross expenditures of a taxpayer.

The draft determines the possibility of using decrease of inventory holdings through methods:

• of value of the first to arrive;
• identified value of a respective unit of inventory holdings;
• weighted average cost.

The draft, if approved, will harmonize tax accounting to the rules established by the national provision (standard) on accounting.