The tax treatment of foreign exchange gains and losses incurred by Ukrainian insurers has been clarified by the state tax administration.
Taxation of foreign exchange gains and losses has been a sensitive issue in Ukraine given the exchange rate fluctuations during the final quarter of 2008.
Insurers' profits from their main activities in Ukraine are subject to corporate profit tax at either 0% or 3%, depending on the type of insurance activity.
However, to secure their obligations, the insurers have created special reserves in a foreign currency. The tax authorities have ruled that profits in the form of foreign exchange gains are subject to corporate profit tax at the standard 25% and that foreign exchange losses relating to the special reserves are treated as tax deductible expenses.
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The original publication date for this article was 06/04/2009.