Changes in the tax and banking sector under martial law
We would like to inform you that on March 17, 2022 the Law “On Amendments to the Tax Code of Ukraine and Other Legislative Acts on the Validity of Regulations for the Period of Martial Law” dated March 15, 2022 № 2120 (hereinafter – the Law) entered into force.
The law provides for numerous amendments in the field of taxation and banking sector. Let’s focus on the main ones, which, in our opinion, deserve attention.
Payment for land (land tax, rent payments for land plots of state and communal property)
Temporarily for the period from March 2022 to December 31 of the year following the year in which martial law is terminated or lifted, no land fee (land tax and rent for land plots of state and communal property) for land plots (land stakes) (shares)), located on territories where military operations are (were) taking place or on territories temporarily occupied by armed formations of the Russian Federation, and are owned or used, including on a rental basis, by individuals or legal entities, as well as land plots (land stakes (shares)) determined by regional military administrations to be contaminated with explosive objects and/or on which there are fortifications structures. The list of territories where hostilities are (were) taking place or which are temporarily occupied by armed formations of the Russian Federation is determined by the Cabinet of Ministers of Ukraine.
Temporarily for the tax (reporting) years for 2022 and 2023 the total minimum tax liability is not accrued and not paid for land plots located in areas where military operations are (were) taking place or in areas temporarily occupied by armed formations of the Russian Federation or for land plots which are determined by regional military administrations as littered with explosive objects and/or where there are fortification structures. The list of territories where hostilities are (were) taking place or temporarily occupied by armed formations of the Russian Federation is determined by the Cabinet of Ministers.
At the same time, the Law does not provide for exemption from the tax on immovable property other than land and transport tax.
Unified social contribution
Temporarily, from March 1, 2022 untill the termination or cancellation of martial law in Ukraine, as well as within twelve months after the termination or cancellation of such martial law, individuals – entrepreneurs, including those who have chosen the simplified tax system), persons who carry out independent professional activity, namely scientific, literary, artistic, educational or teaching, as well as medical, legal practice, including advocacy, notarial activity, or persons engaged in religious (missionary) activity, other similar activity and receiving income from this activity), members of a farm, if they do not belong to persons who are subject to insurance on other grounds) are offered the right not to assess, calculate and pay the single contribution for themselves.
Herewith, the Law does not specify the source of funding of the relevant costs and ensuring their payment.
It has been established that during the mobilization period defined by the Decree of the President of Ukraine No. 69/2022 dated February 24, 2022 “On General Mobilization”, employers – single tax payers who have chosen the simplified taxation system – individual entrepreneurs who belong to the second and third groups of single tax payers, as well as legal entities belonging to the third group of single tax payers, have the right by their own decision not to pay the unified contribution for employees called up for military service in the Armed Forces of Ukraine during mobilization. This list does not include employers of legal entities under the general system of taxation.
Amounts of the single contribution accrued and not paid by employers defined in paragraph one of this paragraph shall be paid at the expense of the state budget, except for periods in which employees defined in paragraph one of this paragraph received income in the form of cash allowances, from which the single contribution was paid at the expense of the state budget.
For the duration of the legal regime of martial law, as well as for three months after the termination or cancellation of martial law, the payers of the unified contribution are not charged a penalty, and accrued penalties for these periods are subject to write-off.
A moratorium is established on documentary audits of the correctness of the accrual, calculation and payment of the unified contribution for the duration of the legal regime of martial law, as well as for three months after the termination or cancellation of martial law. Documentary audits of the correctness of the accrual, calculation and payment of the unified contribution, which were initiated before February 24, 2022, and have not been completed, shall stop on the last calendar day of the third month and from the date of the termination (cancellation) of military status.
VAT, income tax, excise tax, personal income tax
Operations of alienation and/or seizure from legal entities and individuals for the needs of the state under the legal regime of martial law for the needs of the Armed Forces of Ukraine and the defense of Ukraine in accordance with the Law of Ukraine “On transfer, compulsory alienation or seizure of property under the legal regime of martial law or emergency situations” without compensation of its value do not apply to operations on the sale of fuel.
The mechanism of formation and confirmation of the VAT tax credit for the period of martial law was defined – temporarily for the period of the legal regime of martial law, taxpayers on transactions for the purchase of goods/services, for which the suppliers have not registered tax invoices and/or calculations of adjustments to them in the Unified Register of tax invoices, include in the tax credit of the reporting period the amounts of value added tax, paid (accrued) as part of the cost of purchased goods, services on the basis of the primary (settlement) documents available to the payer, drawn up (received) by the taxpayer on operations of purchasing goods/services in accordance with the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”.
Within six months after the end or cancellation of martial law, taxpayers are required to register in the Unified Register of Tax Invoices all tax invoices and adjustment calculations, registration of which is postponed during martial law, and tax credit declared by taxpayers during such martial law on the basis of the primary (settlement) documents available to the payer, is subject to obligatory clarification (bringing into compliance) taking into account the data of tax invoices and adjustment calculations registered in the Unified Register of Tax Invoices.
Paragraph 198.5. of Article 198 of the Tax Code (not charging tax liabilities when using purchased goods in non-business operations) does not apply in case of loss, destruction of goods purchased with VAT during martial law and/or transfer of goods purchased with VAT to state or municipal property of territorial communities of villages, towns, cities, including volunteer formations of territorial communities, other persons to ensure the defense of Ukraine during martial law.
It has been determined that goods and services do not constitute a supply of goods and services in cases where goods and services are transferred/provided to the Armed Forces of Ukraine, other state and law enforcement bodies, military formations, their formations, military units, units of volunteer formations of territorial communities, other entities in accordance with the laws of Ukraine, institutions or organizations maintained by the state budget for the needs of the defense of Ukraine, protection of public safety and interests of the state, except in cases where such operations for the supply of goods and services are taxed at zero rate of VAT.
There were clarified the norms on peculiarities of accounting the total amount defined by Article 181 of this Code (the limit) for registration by the VAT payer, which consists in not taking into account the volume of transactions for charitable assistance, gratuitous supply of goods / services to charitable organizations formed and registered in accordance with the law, as well as the provision of such assistance by charitable organizations to the purchasers (subjects) of charitable assistance in accordance with the law, which was provided during the period of martial law.
The provisions concerning exemption of operations from VAT on the importation into the customs territory of Ukraine and the supply on the customs territory of Ukraine of defense goods, defined as such under paragraph 29 of Article 1 of the Law of Ukraine “On Defense Procurement”, medicine, etc. are brought in line with the current laws of Ukraine.
Supplementing the current regulations on accounting as expenses in full the amounts of funds transferred to the special accounts opened by the National Bank of Ukraine to collect funds to support the Armed Forces of Ukraine in connection with the military aggression of the Russian Federation against Ukraine and for humanitarian aid to Ukrainians affected by the Russian aggression.
The possibility to conduct settlement transactions using PTRs/PPTRs in the offline mode in excess of the time limits established by law has been provided.
Temporarily, for the duration of the legal regime of martial law, supply operations on the customs territory of Ukraine and the import into the customs territory of Ukraine for petrol, heavy distillates and liquefied gas that are classified according to the codes of UCG FEA specified in subparagraph 215.3.4. paragraph 215.3 of Article 215 of this Code, which under paragraph 40 subsection 5 of this section set the excise tax rate of EUR 0.00 per 1000 liters, as well as crude oil or petroleum products derived from bituminous rocks (minerals), classified under UCG FEA codes 2709 00 10 00 and 2709 00 90 00, are taxed at the rate of 7 percent VAT and are exempt from excise tax.
Licenses are considered valid if before the termination or cancellation of martial law in Ukraine or in the presence of force majeure circumstances (force majeure) the next payment for the license has not been paid and / or expired license term for: production and circulation of alcohol, alcoholic beverages, tobacco products and liquids used in electronic cigarettes; production, storage, wholesale and retail trade in fuel and places of production, storage, wholesale and retail trade in fuel.
Obligations to pay regular payments / actions to extend the license must be fulfilled by the enterprise within 30 days following the day of the termination or cancellation of martial law in Ukraine;
In excise warehouses, partially destroyed and located in areas of hostilities, or temporarily occupied territories by armed formations of the Russian Federation, accounting of fuel and ethyl alcohol will be carried out on the basis of inventory data conducted after the end of the events specified in this paragraph.
The right to a tax rebate on personal income tax in the amount of 16% instead of 4% for donations to non-profit organizations is granted.
It has been established that, based on the results of the tax (reporting) periods for 2022 in the expenses from the production of a certain type of independent professional activity, as well as in the expenses of an individual entrepreneur from the production of economic activity, except for persons who have chosen the simplified taxation system, expenses in the form of property may be taken into account, including funds voluntarily transferred (provided, transferred) to the Armed Forces of Ukraine, National Guard of Ukraine, Security Service of Ukraine, Foreign Intelligence Service of Ukraine, State Border Service of Ukraine, Ministry of Internal Affairs of Ukraine, State Protection Authority of Ukraine, State Service of Special Communication and Information Protection of Ukraine, volunteer formations of territorial communities, other military formations formed in accordance with the laws of Ukraine, their formations, military units, subunits, institutions or organizations maintained at the expense of the state budget for the needs of ensuring state defense, as well as in favor of the central executive authority, which ensures the formation and implements the state policy in the sphere of civil protection, civil protection forces and/or healthcare institutions of state and/or municipal property, and/or structural subdivisions on healthcare issues of regional, Kyiv and Sevastopol city state administrations, and/or funds were transferred to special accounts opened by the National Bank of Ukraine for the collection of funds.
Temporarily, for the period before the termination or cancellation of martial law on the territory of Ukraine, the time limits set for registration of legal entities and their separate subdivisions as taxpayers at the main place of registration or physical persons-entrepreneurs at tax address shall be terminated, and transfer of data on registration of such taxpayers in the supervisory authorities to the Unified State Register of Legal Entities, Individuals – Entrepreneurs and Public Associations.
The single tax
The stay limit for the III group of single taxpayers has been increased from UAH 10 million. up to UAH 10 billion and the amount of tax is set at 2% of turnover. Removal of restrictions on the number of employees. Removal of restrictions on activities, except:
activities for the organization, conduct of gambling, lotteries (except for the distribution of lotteries), betting (bookmaker betting, paritotalizator);
production, export, import, sale of excisable goods (except for retail sale of fuels and lubricants in containers up to 20 liters and the activities of individuals related to the retail sale of beer, cider, peri (excluding alcohol) and table wines); mining, sale of minerals;
activities of insurance (reinsurance) brokers, banks, credit unions, pawnshops, leasing companies, trust companies, their institutions of accumulative pension provision, investment funds and companies, other financial institutions specified by law;
representative offices, branches, offices and other separate subdivisions of a legal entity that is not a single tax payer;
individuals and legal entities – non-residents.
Individual entrepreneurs – the single taxpayers of I and II groups, have the right not to pay the single tax. Thus, such persons do not fill in the declaration of the single taxpayers of an individual entrepreneur for the period in which the single tax was not paid.
To choose or transfer to a simplified taxation system with new pecularities, the business entity shall submit an application to the supervisory authority at the place of the tax address by the last day of the month preceding the period of transition to the simplified taxation system.
Business entities (newly created) registered in the manner prescribed by law, which within 10 days from the date of state registration have applied for the simplified taxation system taking into account the peculiarities of taxation established by this paragraph, are considered single taxpayers of the III group from the date of their state registration.
After the the termination or cancellation of martial law on the territory of Ukraine, single taxpayers of the III group who on the day of the termination or cancellation of martial law on the territory of Ukraine used the peculiarities of taxation established by this paragraph from the first day of the month following the month of the termination or cancellation of martial law on the territory of Ukraine lose the right to use the peculiarities of taxation provided for in this paragraph, and are automatically considered to apply the tax system on which such taxpayer was before the election of the peculiarities of taxation provided for in this paragraph.
The right to determine the procedure for payment of the single tax was given to the Cabinet of Ministers.
Other additional amedments
The transfer of funds to the Armed Forces, etc., as well as to health care institutions, regardless of the type of charitable activity specified in the statutory documents, is not considered a violation of the requirements for the activities of non-profit organizations.
Inspections on the declarations are resumed and according to which the application for the budget refund of VAT has been submitted.
At the same time, in case of violations of the law based on the results of such inspections, taxpayers are held liable, and the requirements of the law on the moratorium (suspension) of providing fine (financial) sanctions (fines) for the period of martial law and / or for the period of quarantine established by the Cabinet of Ministers of Ukraine in this case does not apply, including the provisions of the Tax Code on force majeure.
Paragraphs 200.10 – 200.12 of Article 200 of the Tax Code regarding budget reimbursement of VAT have been suspended, except for the approval by the controlling authority of the claimed amount of budget reimbursement based on the results of the in-office audit.
Until the end of martial law, sanctions for violation of the law on payment transactions recorders are not applied, except for sanctions for violation of the procedure for settlement operations in the sale of excisable goods.
The field of banking law
There shall be liability for failure to ensure the ability to make settlements for products (services) with the introduction of electronic means of payment.
The National Bank of Ukraine shall be entitled to determine the specifics of activities of non-bank financial institutions regulated and supervised by the National Bank, as well as the supervision, including foreign exchange supervision, of such persons in the event of martial law or a special period.
The following provisions of the Law of Ukraine “On Banks and Banking activity” have been temporarily suspended:
part seven of Article 49, which gives banks the right to issue blank credits only if economic norms are met – for the duration of martial law;
paragraphs 1 and 4 of Part one of Article 75, which establish the obligation National Bank of Ukraine to make decision on the classification of the bank to the category of problematic, if the bank allowed the violation of the minimum value of regulatory capital ratio (adequacy) and/or core capital adequacy ratio, the minimum value of at least one of the liquidity standards in the amount prescribed by law – during martial law and within four months after its termination or cancellation;
Paragraph 2 of Part 1 of Article 76, which established the obligation of the National Bank of Ukraine to make decision on the classification of the bank as insolvent in case of reduction of regulatory capital ratio (adequacy) and/or core capital adequacy ratio by 50 percent or more of the minimum level established by regulations of the National Bank of Ukraine – during the martial law and within six months after its termination or cancellation.
A special procedure of financial monitoring (identifying the sources of origin) is established in case of depositing by a client-individual to their current account in cash in the amount of UAH 400 thousand or more, if such client has not provided the appropriate documents or information at the request of the bank. It has been proposed to establish that the bank does not take measures to identify the sources of origin of such funds, but during martial law the customer will be able to use them only to transfer funds to the special accounts opened by the National Bank of Ukraine to support the Armed Forces of Ukraine and/or humanitarian aid to Ukrainians affected by the actions of the Russian Federation aggressor state, as well as to purchase domestic government bonds “War Bonds”. After the termination or cancellation of martial law and passing the procedures established by law, the client will be able to use these funds without restrictions.
The norms of the Law “On Mortgages” are suspended in terms of exercising the right of the mortgagor to acquire ownership of the mortgaged object; exercise of the mortgagor’s right to sell the subject of the mortgage; eviction of residents, etc.
Exemption of consumers from their liability to the lender for late performance of obligations under a consumer loan agreement during martial law in Ukraine and within thirty days after the day of its termination or cancellation.