Alexander Weigelt and Denys Vergeles on Tax relief measures under martial law in Ukraine in beck-online: Ukraine-Krieg und Recht – (UKuR) 2022
Tax relief measures under martial law in Ukraine
Am Tag des russischen Überfalls auf die Ukraine (24.2.2022) verhängte der ukrainische Präsident Selenskyj mit Zustimmung des Parlaments für zunächst 30 Tage das Kriegsrecht; dies wurde zwischenzeitlich verlängert. Seither wurden für die Dauer des Kriegsrechts verschiedene steuerliche Erleichterungen eingeführt, die nachfolgend im Überblick dargestellt werden. Die Änderungen spiegeln zum einen die eingeschränkte Funktion der ukrainischen Steuerbehörden wider. Zum anderen zielen sie darauf ab, unternehmerische Tätigkeiten unter Kriegsbedingun- gen zu stimulieren und die Herstellung bzw. Beschaffung kriegswichtiger Güter zu erleichtern. Insbesondere die mehrere Millionen registrierten Kleinunternehmer, die lediglich einen monatlichen Pauschalsteuerbetrag entrichten, werden steuerlich und hinsichtlich ihrer Buchhaltungspflichten entlastet.
The ongoing massive Russian aggression against Ukraine has severely affected all aspects of the country’s life. The operation of numerous businesses has been disrupted by both military action and legal restrictions imposed in the context of martial law (first introduced by Decree of the President of Ukraine No. 64/2022 dated February 24, 2022 and later extended).
In order to address the severe difficulties that businesses are currently facing, the Ukrainian Parliament has provided a number of tax relief measures. These measures, as embodied in Laws of Ukraine No. 2118-IX dated March 3, 2022, No. 2120-IX dated March 15, 2022, No. 2139-IX dated March 15, 2022 and No. 2142-IX dated March 24, 2022 are meant to apply only for the duration of martial law and automatically expire thereafter, unless the Laws explicitly provide otherwise.
Local taxes and tax benefits can be introduced without previous public hearings and discussions of their regulatory impact.
All taxpayers can submit their tax returns (declarations) and other documents in paper form (including those who normally are required to submit in electronic form).
No liability for certain tax violations
No liability shall apply for tax violations if the tax-payer was objectively prevented from duly complying with tax obligations. The liability-free period extends to six months after the end of martial law
Exceptions apply if violations were established by a tax audit permitted under martial law (audits regarding VAT refund and factual audits).
Liability for failure to use cash registers (in particular, by private entrepreneurs) and other violations of the laws on cash registers does not apply, except for transactions with excisable goods.
Affected taxpayers have to comply with their respective obligations within six months after the end of martial law.
The provisions on compensation for damage caused to taxpayers by decisions, actions or omissions of the Tax Office do not apply.
Suspension of terms
All terms (periods) provided by tax laws, including limitation periods, are suspended.
Tax audit moratorium
Tax audits are not conducted, except for audits related to VAT refund and factual audits. As regards unified social tax, audits are not conducted until three months after the end of martial law.
At the same time, the tax audit moratorium imposed earlier due to COVID-19 does not apply during mar- tial law.
VAT-, excise and customs-free transactions for defense purposes
Voluntary free-of-charge transfers or forced seizure of funds or property and the provision of free-of-charge services to the Armed Forces and some other authorities and institutions for defense purposes as well as to healthcare institutions are not subject to VAT.
Free-of-charge transfers or forced seizure of fuel or other excisable goods for the benefit of the Armed Forces and some other authorities and institutions for defense purposes as well as of healthcare institutions, their provision as humanitarian help shall not be subject to VAT and excise tax.
The importation to Ukraine and supply on its territory of individual protective ammunition (armored vests, helmets, etc.), goods for defense purposes, medicines in connection with repelling the Russian aggression and with martial law is VAT free.
Import of goods to Ukraine by payers of unified tax belonging to Groups I, II, and III shall be VAT-free (except for taxpayers of Group III whose tax rate is 3 % and who are registered as VAT payers).
Import of transport vehicles to Ukraine by individuals shall be released from VAT, excise tax and import customs duties. This exemption does not ap- ply to goods originating or imported from the aggressor (occupant) state or occupied territories.
The destruction of a taxpayer’s assets/goods due to force majeure (military hostilities) shall not inflict VAT liabilities.
Customs duties do not apply to imported food products of social significance, as well as medicines and medical devices for which prices are fixed.
Other VAT and excise tax preferences and exemptions
Purchasers can claim VAT credit and refund without registration of a tax invoice by the supplier. Within six months after the end of martial law, respective VAT invoices shall be registered and adjustments shall be made.
VAT rate applicable to fuel supply transactions shall be 7 %.
Excise tax rate applicable to fuel supply transactions shall be 0 %.
Until December 31, 2024, the applicable VAT rate to domestic transportation of passengers and cargo by air transport shall be 7 %.
No interest rate applies to VAT not timely refunded to the taxpayer from the state budget.
Simplified customs clearance was introduced for certain goods based on an importer’s declaration that they do not fall under categories requiring import permits (in particular, cultural values, radio-electronic means, narcotics, military or dual-use goods, pesticides, hazardous wastes).
Goods imported by companies to the customs territory of Ukraine for free circulation are excempted from customs duties except for ethyl alcohol; alcoholic beverages; tobacco products; goods originating or imported from the aggressor (occupant) state or occupied territories.
A moratorium on all customs-related public inspections (audits) is imposed.
Terms (deadlines) set by specific provisions of the Customs Code are suspended. Other terms (deadlines) can be extended upon request of an applicant.
Customs registration of non-resident participants of customs operations (in cases provided by the Customs Code) is not required.
IP registration in the Customs Register shall extend automatically.
Personal income tax preferences and exemptions
Donations to members of the Armed Forces, other military units, civil defense enterprises and forces immediately involved in repelling the Russian aggression, as well as to individuals residing in active com- bat areas or persons displaced from such areas are not subject to personal income tax.
Other donations granted during martial law to individuals who suffered from the Russian aggression are free from personal income tax.
Tax rebates and deductions are provided for individuals, private entrepreneurs and self-employed persons who donate for defense purposes in 2022.
Social tax preferences and exemptions
For the duration of martial law and 12 months there-after, individual entrepreneurs (including payers of unified tax), self-employed persons as well as individual farm members are relieved from payment of social tax.
Payers of unified tax (simplified taxation, Groups II and III) are released from social tax for their employees conscripted to the Armed Forces during mobilization. For such employees, social tax contributions shall be reimbursed by the state budget, for which purpose employers have to file tax calculations.
Land, environmental tax and rent preferences and exemptions
No land tax and land rent are charged for land plots located in active combat areas, occupied territories, for land plots contaminated with explosives or underlying fortification structures (the minimum tax liability for the named land plots is not due in 2022 and 2023).
No environmental tax is charged in 2022 for objects of taxation located in active combat areas or occupied territories. For taxpayers producing and storing radioactive waste on territories affected by active combat and temporarily occupied territories, the environmental tax exemption shall apply until December 31 of the year in which martial law is lifted.
Differentiated stimulating rent payments for the extraction of natural gas effective as of March 31, 2022 shall apply until March 31, 2032 without any increase.
Real estate tax exemptions
No real estate tax is charged on residential real estate located on territories affected by active combat or temporarily occupied by Russian forces as well as real estate rendered unfit for living due to the Russian aggression:
- for tax years 2021 and 2022 – on real estate owned by individuals;
- in the period March 1 through December 31, 2022
- on real estate owned by legal entities.
No real estate tax is charged in the period starting on March 1,2022 and ending on the last day of the year in which martial law is lifted on non-residential real estate located on territories affected by active combat or temporarily occupied by Russian forces.
Extended simplified taxation for businesses (effective since April 1, 2022)
Payers of unified tax belonging to Groups I and II are relieved from payment of the tax and tax reporting.
The annual income threshold for taxpayers belonging to Group III is increased to UAH 10 billion (approximately EUR 313 Mio. as of April 17, 2022). The number of employees employed by such taxpayers is unlimited.
The following entities and individuals cannot enroll on simplified taxation:
- Engaged in gambling, lotteries, betting, currency exchange, manufacture of and trade in excisable goods (with the notable exception of taxpayers engaged in importation of transport vehicles), the extraction of and trade in mineral resources;
- Financial institutions, securities registrars;
- Branches and representative offices of entities that are not payers of unified tax;
The applicable tax rate is 2 % on income (turnover), as opposed to profit (income minus expenses plus adjustments).
The general corporate profit tax rate of 18 % chargeable on profit does not apply.
Enrolled taxpayers are relieved from VAT, land and real estate tax.
VAT registration of taxpayers who switched to simplified taxation is considered suspended.
VAT liabilities incurred under assets, goods and services purchased (manufactured) before moving to simplified taxation and then realized in VAT-free transactions shall be fulfilled when the taxpayer returns to its previous taxation system.
The reporting and tax payment period shall be the calendar month.
The simplified taxation regime starts to apply on the next day after submitting an application (not from the next reporting period, as previously intended).
Newly registered business subjects benefit from simplified taxation from the day of their registration if they apply within 10 days therefrom.
After the end of martial law, those who enrolled on simplified taxation with the 2 % tax rate automatically return to their previous taxation system.
Other important provisions
The Tax Office shall provide digital services and accept electronic documents via taxpayers’ electronic accounts on business days between 8:00 a. m. and 6:00 p. m.
The deductibility restriction for corporate profit tax purposes (4 % of the taxable profit for the previous year) does not apply to certain donations for defense and healthcare.
The head of a territorial military administration can order an immediate release of encumbered assets from tax lien.
Importers of tobacco goods can, as an exception, order to print excise marks abroad in case the Ukrai- nian Tax Office is not able to provide them. The affected tobacco goods shall be sold not later than three months after the end of martial law.
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