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Weekly Digest

  • Threats of shredding a business in FOPs
  • Most complain about customs and tax
  • If you make controlled transactions
  • What will be demonstrated at the exhibition “Interzum 2019”
  • World market of upholstered furniture

Everything that happened last week in Ukraine and the world and is relevant for the furniture maker, read our digest:

1. When large companies use a scheme with individual entrepreneurs for doing business, this is an abuse of the situation. This was stated by the head of the State Tax Service Sergey Verlanov.
According to him, to solve this problem to adopt new laws is not required. “We will look for arguments – in the existing legislation, in judicial practice, in the Labor Code – that there are situations in which abuses are practiced.”
The Head of the State Tax Service also noted that practically all small and medium businesses are somehow connected with payroll and legal entities on the simplified taxation system, and this is a big challenge for the Ukrainian economy. “The division of these small and medium-sized businesses into several, several tens or hundreds of FLP does not allow us to actually consolidate the company’s reporting, show the value of this business, therefore, the business stops developing,” said Sergey Verlanov.
The official stressed that 98.5% of the profit tax in Ukraine is paid only by 5,000 companies, although it is registered 100 times more – about 500,000.
He also added that because of this, business cannot receive capital for business expansion, innovation, and access to international markets.

2. In the first quarter of 2019, Ukraine recorded a record number of complaints about the actions of the tax and customs services, the press service of the Business Ombudsman Council (RBO) reports in a report on the results of the body’s activities for the specified period.
At the same time, as reported in the report, the number of complaints from such tax issues as, for example, blocking tax bills, tax criminal cases or electronic administration of VAT decreased by 15% compared to the previous quarter.
As for the complaints about the customs officers, in the first quarter their number reached a record and made 29 appeals. They primarily relate to customs clearance delays and customs value adjustments. In total, the DBR managed to return to the complainants 21 million UAH, of which the lion’s share is the return of customs payments and the cancellation of the adjustment of the value of imported goods.

3. Taking into account annual changes in the Tax Code regarding transfer pricing (TC) and increasing attention to international operations, the likelihood of a company to receive a request from a tax authority is significantly increased. What you need to know to not get into trouble.
First, it must be recalled that, in addition to low-tax jurisdictions, from 2017, certain organizational and legal forms of non-residents in quite respectable countries, for example, in Germany, Great Britain or Poland, come under the control of shopping centers in Ukraine.
Secondly, last year the list of countries with low corporate tax rates changed (income tax is less than 13%). After some time and through a certain diplomatic scandal, six countries (Estonia, Latvia, Georgia, Malta, Hungary and Bulgaria) were excluded from this list. And this creates a lot of problems for Ukrainian companies reporting on the shopping center for 2018. Because they have to report on transactions with non-residents from these countries, while they were on the list. Here you need to carefully monitor the dates of performance of contracts (transfer of ownership, date of service) to determine which operations are considered controlled.
Thirdly, from January 1, 2019, the rules of control over operations with nominal intermediaries, the so-called “shell companies”, which do not carry out any real business activity and are often used in export-import operations of Ukrainian companies, have become tougher.

4. Of course, for various reasons, not all of our colleagues – furniture makers and designers – will get to the Cologne exhibition “Interzum 2019”, which begins tomorrow in Cologne. But in order for you to be aware of what she will be demonstrating this year, we have prepared a brief information about this.
The exhibition will be four trend areas: Digitalization, Tiny Spaces, Disruptive Materials and Mobile Spaces. Briefly tell about the content of each of them in this and subsequent collections of news.
“The next technological revolution – the digital one – is radically changing not only production, but also retail. Individualization of residential interiors, furniture personalization, digitalization of the furniture itself and accessories, and finally, new amenities in the shopping process – these are the key aspects that the foremost interior industry industry pays attention to today, ”the Digitalization zone was presented at the press conference on the occasion of the opening, what will take hall 3.2. The only question is how to anticipate the client’s expectations by offering him new experience using digital technologies.

5. The upholstered furniture market, according to current estimates by the Milan Center for Industrial Research “CSIL”, accounts for 16% of the global consumption of all furniture products, and the sector’s volume in monetary terms is estimated at 74 billion dollars. The largest markets for upholstered furniture today, as before, are China, the United States and Germany.
Global sales of upholstered furniture increased by 23% from 2008 to 2017, mainly due to Asian countries. China, India and Indonesia are the fastest growing markets in their macro-region. Thus, the PRC showed an average annual growth rate of sales of upholstered furniture by 7%, taking 2017 the bar at 20 billion dollars. In the current, according to analysts’ forecasts, Asia and Oceania will again be leaders in terms of growth in sales of sofas and armchairs.
If we talk about the global production of upholstered furniture, then from 2012 to 2017 they grew by 14%, and this dynamics is better than that of furniture in general. The main share – 54% – of the cumulative production of sofas and armchairs is provided by factories in the Asia-Pacific region. Europe contributes 21%, North America 15%. China, the USA, Poland, India, Italy and Germany are on the top list of countries leading in sofas. These six countries cover almost 80% of the global demand for products in the soft sector.

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