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Corporate accounting policy as a tool of protection in relations with regulatory authorities

Accounting policy is the foundation on which the entire accounting of an enterprise is based. Accounting policy order is the first and the main document of a company, which regulates the accounting procedure on the basis of which the tax reporting on the income tax is drawn up. Therefore, it is no wonder that for every accountant it is very important to have a good knowledge of what accounting policies are.

Absence of accounting policy order can do much harm to the income tax payer. This tax is calculated on the basis of accounting financial result determined by the requirements of Accounting Provision (Standart) or International Accounting Standards and corrected on tax differences, stated in Chapter III and subdivision 4 of section XX of Tax Code of Ukraine (clause 134.1.1). Therefore, in tax disputes with fiscal authorities income tax payers are often forced to prove the legitimacy of applying one or another depreciation method, the principle of distribution of expenses, features of prime cost formation, option of accounting for exchange differences etc. And here the accounting policy order plays an essential role. In such disputes, the courts, first of all, investigate the norms of this administrative document. This is clearly evidenced by a wide judicial practice.

Our specialists provided services for the development of accounting policy and its implementation for the non-resident’s permanent representative office, taking into account the specific features of the representative office’s activities. The accounting policy was designed to minimize, in the future, the tax risks associated with the correct recognition and measurement of income and expenses that may arise during the economic activity of the representative office, as well as the correctness of the valuation of assets and liabilities.

About the project

Date 2019

Denis Bondar

Managing Partner, PATRIOT Law Firm

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