1. Repayment and Restructuring of Accounts Payable on Taxes and Other Obligatory Payments
1.1 Mutal Offsets with the budget
Mutual offsets of the budgets, budgetary organizations with legal entities that are tax bearers and have accounts payable to the budget have been in place in Ukraine since 1996. However, legal regulation of mutual offsets with the budget was and remains deficient, inconsistent, and contradictory.
1.2 Goverment Promissory Notes
Treasury bills were put into circulation by Resolution of the CMU of 27 June 1996 No 689 approving the “Procedure of Use of State Treasury Bills”.
The procedure established that treasury bills should be drawn at sight, and their maturity term shall not exceed one year.
The taxes payable to the State Budget (for instance, arrears on Value Added Tax) may be accepted in the treasury bills.
The Head Department of the State Treasury acts as the drawer and payer of bills. Item 1 of the “Procedure of Use of Treasury Bills”. In accordance with the General Agreement with the Head Department of State Treasury, the state enterprise “Ukrainske Spetsialisovane Finansove Pidriemstvo (Ukrspetsfin)” [Ukrainian Specialized Financial Enterprise “Ukrspetsfin”] acted as the general agent of the former. Bills drawn by the Head Department of the State Treasury were transferred to “Ukrspetsfin”.
1.3 Deferred and Installment Payment
The State has special powers to introduce a preferential tax regime through appointed bodies. This includes deferred and installment payment of taxes as well as other mandatory payments.
Under existing legislation, the State Tax Service is entitled to grant deferred and installment payment of taxes and other mandatory payments. Item 9 Article 11 of the Law of Ukraine “On the Tax Service in Ukraine”. In order to provide for this, the State Tax Administration of Ukraine with its Resolution of 8 April 1998 No 172 approved the “Order of Granting Deferred and Installment Payment of Taxes and Other Mandatory Payments by the State Tax Service Bodies”.
1.4 Charge-off Tax Arrears, Financial Sanctions and Forfeit Pursaunt to Laws and By-Laws
Due to the specific procedure of calculating the basic taxes (taxes are calculated upon sale irrespective of actual receipt of payment), a large number of Ukrainian enterprises is burdened by budget debts that become bad debts due to significant fines applied.
1.5 Payment of Liabilities in Kind (Wages Arrears and Contributions to the Pension Fund)
The first stage is regulated by legislation on economic activity of the enterprise. Chapter 20 of the Civil Code of Ukraine “Purchase-Sale Agreements” and Article 21 of the Law of Ukraine “On Enterprises”, from the taxation point of view – Laws “On Value-Added Tax”, “On Taxation of Enterprise Income”, etc. The second stage is governed by the Labor Code of Ukraine. Chapter 7 “Remuneration of Labor”.
1.6 Repayment of Arrears Payable to the Budget and Extra-Budgetary Funds at the Expense of Debtors
In accordance with Decree of the CMU “On Collection of Outstanding Taxes and Non-Tax Payments” of 21 January 1993 No 8-93 and the Instruction “On Specific Features of Application of Decree of the Cabinet of Ministers of Ukraine ‘On Collection of Outstanding Taxes and Non-Tax Payments’” of 21 January 1993 No 8-93, Approved by Order of the Ministry of Finance of Ukraine of 2 November 1993 No 84. the following measures are implemented
2. Repayment of Accounts Payable under Economic Liabilities
2.1 Contractual Options of Repayment and Restructuring of Debts
Relations of an enterprise with other enterprises, organizations and individuals in all spheres of economic activities shall have contractual basis. According to Article 21 of the Law “On Enterprises”. Enterprises shall be free to choose subject of the contract, define obligations and other conditions of economic legal relations, which do not contradict the Ukrainian legislation”.
2.2 Repayment of Commercial Bank Loans
One of the options used for repayment of commercial bank loans is repayment through the insurance reserve of the bank. According to the legislation, any bank, as well as any non-banking financial institution established according to the norms of respective laws, excluding insurance companies, is obliged to form the insurance reserve for reimbursement of possible losses on the principal amount of debt (without interest and fees) under all types of loans and other active transactions, which are referred to their business activities by law. Item 12.2 of Article 12 of the Law of Ukraine “On Enterprise Profit Tax”.
2.3 Court-Related Methods of Repayment of Liabilities
Effective legislation of Ukraine contains a number of regulations for repayment of accounts payable through the court procedures. Some of them are presented below.