Profit Tax for the Gambling Business – The State Tax Service Explained How to Correctly Determine the Taxable Object

The Main Department of the State Tax Service in Odessa Region provided clarifications regarding the procedure for determining the taxable object of profit tax for enterprises organizing gambling activities, which receive income exclusively from the organization and conduct of gambling, as well as regarding the filling of line 02 of the Corporate Profit Tax Declaration for applying the rate defined in paragraph 136.1 of article 136 of the Tax Code of Ukraine.

According to subparagraph 134.1.1 of paragraph 134.1 of article 134 of the Tax Code of Ukraine, the taxable object of profit tax is the profit from sources originating in Ukraine and abroad, determined by adjusting the financial result before taxation, formed in the enterprise's financial statements in accordance with national accounting standards or international financial reporting standards, by the differences defined by the Tax Code of Ukraine.

It is separately defined that the taxable object also includes the income of gambling organizers received from the respective activity, except for income from gaming machine halls, reduced by the amount of payments to players, which is taxed according to paragraph 141.5 of article 141 of the Tax Code of Ukraine (subparagraph 134.1.5 of paragraph 134.1 of article 134 of the Tax Code), as well as income from organizing and conducting gambling in gaming machine halls (subparagraph 134.1.6 of paragraph 134.1 of article 134 of the Tax Code).

According to subparagraph 141.5.1 of paragraph 141.5 of article 141 of the Tax Code, entities in the gambling organization sector simultaneously with paying profit tax at the base rate defined in paragraph 136.1 of article 136 of the Tax Code, pay income tax at rates established by subparagraphs 136.4.1 and 136.4.2 of paragraph 136.4 of article 136 of the Tax Code.

The accrued income tax is not a difference and does not reduce the financial result before taxation.

The base profit tax rate according to paragraph 136.1 of article 136 of the Tax Code is 18%.

When conducting activities in the gambling sector, income tax rates also apply: 10% for income from gaming machine halls (subparagraph 136.4.1 of paragraph 136.4 of article 136 of the Tax Code) and 18% for other income from such activities, reduced by the amount of payments to players (subparagraph 136.4.2 of paragraph 136.4 of article 136 of the Tax Code).

According to paragraph 136.5 of article 136 of the Tax Code, the income tax defined for certain types of activities is part of the profit tax.

Profit taxpayers, including gambling organizers, determine taxable objects in the Tax Declaration approved by the Ministry of Finance order No. 897 dated 20.10.2015.

The financial result before taxation at the 18% rate is reflected in line 02 of the declaration and is determined based on accounting data considering tax differences. Differences are indicated in line 03, and the taxable object in line 04.

Income indicators from gambling and corresponding tax accruals are separately reflected in lines 11–15 depending on the type of activity, and the total tax amount for the reporting period is shown in line 17.

Thus, gambling organizers operating under a license and receiving income exclusively from it determine the taxable object according to the rules of subparagraph 134.1.1 of paragraph 134.1 of article 134 of the Tax Code and simultaneously considering paragraph 141.5 of article 141 of the Tax Code and applying the provisions of subparagraphs 136.4.1 and 136.4.2 of paragraph 136.4 of article 136 of the Tax Code. They must fill in line 02 of the declaration indicating the financial result before taxation formed according to accounting rules.

The clarification also notes that the issue of accounting for income tax in accounting belongs to the methodology of accounting, which is regulated by the central executive authority in the field of financial policy in accordance with the Law of Ukraine "On Accounting and Financial Reporting in Ukraine" and the provisions on the Ministry of Finance of Ukraine.

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