On 15 March 2022 the draft Law “On amendments to the Tax Code of Ukraine and others legislative acts of Ukraine regarding the validity of legislation norms for the period of martial law” No. 7137 – d (the Law) was adopted by the Verkhovna Rada of Ukraine.
The Law is designed to support citizens and businesses during the martial law period and contains significant changes in terms of the administration and payment of the single tax, a decrease in the VAT and fuel excise duty, tax incentives for big businesses and charities.
Simplified tax regime is now could be extended to large business as well (except gambling business, business related to excisable goods, financial and insurance companies) – the limit of turnover for the Group 3 is increased up to UAH 10 billion. The restrictions on the number of employees will not be applied.
Starting from the 1 April and till the end of martial law the tax rate for taxpayers under Group 3 will be reduced to 2% from the turnover and VAT will not be accrued and paid.
In order to apply for simplified tax regime taxpayer should submit application to the supervisory authority at the place tax address statement until the last day of the month preceding the transition period to simplified taxation system. Thus, in order to use tax incentives from 1 April, the application should be submitted until the 31 March.
For individuals applying simplified tax regime under Group 1 and Group 2 the single tax payment is voluntary.
The peculiarities of accrual and payment of the single tax will be determined by the Cabinet of Ministers of Ukraine.
CPT and VAT
During the marital law VAT credit may be recognised based on the duly executed primary documents (RRO documents, acts of acceptance, acts of performed works/rendered services, etc.). Within 6 month period after the end of martial law, all VAT invoices should be properly registered in Unified register and VAT credit recognised during the martial law are subject to mandatory clarification (adjustment) based on the registered invoices.
For the period of martial law 7% VAT rate is applied for import and supply of gasoline, diesel fuel, liquefied gas, and oil to the territory of Ukraine. Besides, the excise tax on gasoline, diesel fuel and liquefied gas is temporary abolished.
Voluntary transfer of funds, goods, including excisable goods, provision of services for the military structures (the Armed Forces of Ukraine, The National Guard of Ukraine, The Security Service of Ukraine, etc., and other military formations or organizations formed in accordance with the laws of Ukraine and maintained at the expense of the state budget) without reimbursement of their value is not considered as supply transaction for the tax purposes.
The VAT credit is fully recognised and compensational VAT liabilities should not be assessed in case:
- Goods were destroyed (lost) due to force majeure during the martial law;
- Goods were transferred to state or municipal ownership, including voluntary formations of territorial communities, as well as provided for the benefit of other persons for the needs of ensuring the defense of Ukraine during martial law.
For the period of martial law, the transfer of fuel for the needs of the Armed Forces of Ukraine and territorial defense units, as well as humanitarian aid is not considered as supply transaction for the tax purposes. The fuel is additionally exempted from the excise tax.
Allowed full deduction for CPT purposes of costs or value of personal protective equipment (helmets, bulletproof vests made in accordance with military standards), technical surveillance equipment, medicine and medical devices, personal care products, food, supplies, and other goods, works performed, services rendered according to the list determined by the Cabinet of Ministers of Ukraine, which were voluntarily paid (transferred) for the state defense’s needs to the military structures (the Armed Forces of Ukraine, The National Guard of Ukraine, The Security Service of Ukraine, etc., and other military formations or organizations formed in accordance with the laws of Ukraine).
Income and gains of combatants and individuals living in combat areas received from charitable organizations is exempted from PIT.
The tax rebate for individuals for 2022 will include expenses transferred to charities and donations to nonprofit organizations (up to 16% of taxable income).
From March 1, 2022, until the end of martial law individuals engaged in independent professional activity, single tax payers and farmers do not pay social insurance contributions (SIC) for themselves.
Single tax payers of Group 2 and Group 3 are allowed not to pay SIC for mobilized workers upon keeping their salary during mobilization.
For the period of martial law and tree months after the moratorium on audits of accrual and payment of SIC is introduced. During this period fines and penalties will not be applied.
Land and environmental tax
From March 2022, until the 31 December of the year following the year when the martial law would be terminated or abolished, taxpayers are exempted from paying land fees for the land plots located in the territories where hostilities are taking place.
The minimum tax liability will not be charged or paid for land plots on which hostilities were conducted, which are temporarily occupied, as well as littered with explosives during 2022-2023.
The list of territories to be determined by the Cabinet of Ministers of Ukraine.
The environmental tax on facilities located in areas where hostilities took place or temporarily occupied territories is abolished for 2022.
The statute of limitation specified by the Tax Code is suspended and the penalty for violation of tax legislation is not accrued.
During the martial law the provision of electronic services by the tax service will be carried out on working days from 8 am to 6 pm.
For the period of martial law, the use of bank accounts by business entities is possible without their registration with the tax authority.
The tax audits should not be started, while ongoing tax audits should be stopped, except:
- Desk audits in case of VAT refund request
- Actual inspections (carried out at the place of actual activity of the taxpayer)
The business entities are obliged to ensure the possibility of settlements for goods using payment cards (with appropriate control and responsibility). A fine of UAH 8,500 is imposed for absences of possibility for card payment.
Sanctions for violating the law on RRO are not applied until the end of martial law.
Penalties will not be charged for violations resulting from force majeure during martial law.
We would like to stress that we listed above changes based on reading of the available last edition of the draft law. We will monitor the updates and clarifications from Ukrainian authorities and will update you accordantly.
Glory to Ukraine!