Concerning the possibility of wholesale trade in beer by a branch (separate subdivision) of a legal entity

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Concerning the possibility of wholesale trade in beer by a branch (separate subdivision) of a legal entity

In accordance with the Law of Ukraine "On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine on Tax Reform", amendments were made to the Law of Ukraine "On State Regulation of Production, Production, and Trade in Ethyl, Cognac and Fruit Alcohol, Alcoholic Beverages and Tobacco Alcohol" of December 19, 1995 Year 481/95-BP, which refers to beer to alcoholic beverages, and these changes will take effect from 01.07.2015.

According to Article 9, Clause 9 of the Law of Ukraine "On Licensing Certain Types of Economic Activities" (as of June 28, 2015), in accordance with the special laws, the following are subject to licensing: production and trade of ethyl alcohol, cognac and fruit, alcoholic beverages and tobacco products .
According to Article 15 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohol, Alcoholic Beverages and Tobacco Alcohol", the import, export and wholesale of alcoholic beverages and tobacco products may be carried out by subjects of management of all forms of ownership in the presence of licenses. The applicant for a license for the wholesale trade in alcoholic beverages may only be an economic entity - a legal entity or an entity - an individual.
In accordance with Article 18 of the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohol, Alcoholic Beverages and Tobacco Alcohol" in case if an entity carries out wholesale trade in alcoholic beverages or tobacco products through a branch (which is not legal a person), the location information of the branch and its identification code are indicated in the license appendix. The application is issued on the application of a business entity, to which is attached a copy of the certificate on the inclusion of a branch in the USREOU with the identification code assigned to it, certified by a notary or the authority that issued the original document, or an official of the licensing authority.
According to Article 64 of the Commercial Code of Ukraine, an enterprise may consist of production structural divisions (manufactories, shops, offices, sections, brigades, offices, laboratories, etc.), as well as functional structural divisions of the management apparatus (departments, departments, offices, services, etc.). Functions, rights and obligations of the structural divisions of the enterprise are determined by the provisions of them, which are approved in accordance with the procedure established by the charter of the enterprise or other constituent documents. The enterprise independently determines its organizational structure, establishes the number of employees and staffing. The enterprise has the right to create branches, representative offices, branches and other separate units, agreeing on the issue of the placement of such units of the enterprise with the relevant local authorities in accordance with the procedure established by law. Such separated divisions do not have the status of a legal entity and operate on the basis of their provisions approved by the enterprise. Enterprises can open accounts at banks' offices through their separate divisions in accordance with the law. Activities of separated divisions of enterprises located outside Ukraine are located in the territory of Ukraine, are regulated by this Code and other laws.
According to Article 95 of the Civil Code of Ukraine, a branch is a separate subdivision of a legal entity located outside its location and carries out all or part of its functions. Representation is a separate subdivision of a legal entity that is located outside its location and provides representation and protection of the interests of a legal entity. Branches and representative offices are not legal entities. They are endowed with the property of the legal entity that created them and act on the basis of the Regulations approved by it. The heads of the branches and representative offices are appointed by the legal entity and act on the basis of the power of attorney issued by it.
Consequently, taking into account the current legislation, we propose the following action plan:

  • Create a branch of a legal entity that has a license for the right to trade in alcoholic beverages. To do this, it is necessary to decide the founders of the legal entity on the establishment of a branch, to approve the Regulations on the branch of a legal entity, to issue a power of attorney to the head of a branch with the powers to represent the interests of a legal entity in a particular region.
  • Register a branch with a state registrar. For this purpose it is necessary to submit to the state registrar at the place of registration of the legal entity: the decision of the owners of the legal entity about the establishment of a branch and registration form №5.
  • Submit information to the DPS at the location of the branch to establish a branch and assign a serial number to her.
  • To file a statement on behalf of the legal entity to the body that issued the license with a request for the issuance of the Annex to the license, which should contain information about the location of the branch and its identification code. The application shall be accompanied by a copy of the certificate of the incorporation of the branch into the USREOU with the identification code assigned to it, certified by a notary or the authority that issued the original document, or an official of the licensing authority.
  • Accounting. In accordance with Part 5 of Art. 8 of Law No. 996 an enterprise may allocate to a separate balance sheet of the branch, which is obliged to keep an accounting, with the subsequent inclusion of their indicators in the financial statements of the enterprise. When compiling the balance sheet of the main enterprise, no information is provided on the internal business calculations (mutual obligations with the branch in equal amount). Consequently, the company must decide whether the subsidiary will have a separate balance sheet, the information from which is to be included in the balance sheet of the parent company and the relevant forms of financial reporting. If the company has decided to allocate a branch to a separate balance sheet, this information is provided in the Affiliate Regulations. For proper accounting, the parent company and branch should use the common principles of accounting policies, which is also desirable to indicate in the Affiliate Regulations.

Regardless of whether a branch is allocated to a separate balance sheet or not, the document flow schedule for the branch should be approved, in which to indicate the composition of the documentation and the terms of its submission to the parent company. Therefore, we recommend the following:
- to create a branch branch for which to open a separate bank account, with the right of the first and second signatures of the director and accountant of the branch;
- to provide the branch with all the powers related to the sale of products (concluding contracts of logistic services, lease of premises, purchase and sale of goods to customers);
- to make a separate seal of the branch.
The arrival of the goods at the branch will be invoiced to the internal movement from the main enterprise (factory), payment for the goods sold as a transfer of funds from the branch to the account of the parent company.
Tax accounting. From 01.01.2015 the branches are not independent taxpayers. It is impossible to consolidate the payment of income tax. In this regard, the profit tax for all branches calculates and pays the parent company at its location.
In cases where the subsidiary independently carries out operations for the supply of goods, it is more convenient for it to independently issue tax invoices. Then the company decides on the delegation of the branch of the right to issue tax invoices. Information about this is usually provided in the Affiliate Regulations. For this, the parent company assigns a separate digital number to each branch, which in writing informs the controlling authority at the place of its registration as a VAT payer. To this end, they provide a Notice of delegation to branches (structural units) of the right to issue tax invoices (Annex 2 to Order No. 966). At the same time in gr. 2 Messages shall be indicated by the branch code from the Unified State Register of Legal Entities and Individuals - Entrepreneurs (EDRPOU).
Such code is available only at branches and representative offices, therefore, the right to issue a tax invoice declaration can only be delegated to affiliates who have the identification code of EDRPOU (information about which is included in the EDRPOU). So, in order for the branch to receive the right to issue tax invoices, it is necessary:

  1. to issue an order on the delegation of the branch of the right to issue tax invoices;
  2. assign a branch to a separate digital code (number, cipher);
  3. notify the tax authority of the decision taken by submitting together with the declaration for the reporting period in which the decision was made on the delegation, notification.

At the same time it is advisable to specify the particulars of the statement of tax invoices by the branch in the Regulation on a branch or in another internal document of the enterprise. For example, an enterprise may decide that:
the branch issues and receives tax invoices only in respect of the transactions for which the contract was entered into by the branch on behalf of the legal entity and all primary documents from the transaction were executed for such a branch;
regardless of who the contract was executed, the branch writes out and receives tax invoices for the operations on which the primary documents for shipment (receipt) of the goods (works, services) were executed for such a branch, or the funds were received (sent) from the account of the branch. That is, in the case when the branch actually conducts operations that are accompanied by the statement of tax invoices.
The powers of the branch accountant will consist in keeping the tax accounting with VAT (registration of tax invoices for the sale of goods, checking and entering into the system of incoming tax invoices from counterparties), charging salaries to branch employees and transferring taxes on salaries: PIT to the tax authority for registration of a branch, and CIS at the place of registration of a legal entity. Submission of tax returns: VAT returns, income tax, excise tax reporting, 1DF, report on a single social contribution is carried out by the accounting department of the parent company, which submits the data in the reports as a whole to the company at its location.

Director, auditor N.A. Zupric

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