The practice of determining the list of territories on which hostilities are conducted for tax purposes

It should be recalled that on the territories in which hostilities are (were) conducted, or in the territories temporarily occupied by the armed formations of the Russian Federation, amendments to the Tax Code establish exceptions for the payment of environmental tax, payment for land (land rent) and real estate tax, other than a land plot:

– for 2022 and 2023 no payment for land is charged or paid;

– from January 01, 2022 to December 31 of the year in which martial law is terminated or abolished, the environmental tax for the generation of radioactive waste and temporary storage of radioactive waste is not charged and paid;

– for 2021, 2022 and until December 31 of the year in which martial law is terminated or abolished, no tax is charged or paid on real estate other than a land plot, for residential real estate, including their parts located in the territories, on which are (were) hostilities or temporarily occupied by armed formations of the Russian Federation, and residential real estate that has become uninhabitable as a result of the armed aggression of the Russian Federation.

We draw your attention to the fact that the list of territories in which hostilities are being conducted or temporarily occupied by the armed formations of the Russian Federation is to be determined and approved by the Cabinet of Ministers of Ukraine.

On April 25, 2022, the Ministry for Reintegration of Temporarily Occupied Territories by Order No. 75 approved the List of territorial communities located in areas of military (combat) operations or under temporary occupation, encirclement (blockade) as of April 25 (hereinafter – the Order). The corresponding Order was developed in pursuance of the requirements of the Resolution of the Cabinet of Ministers, which establishes the procedure for paying assistance from the state for living to internally displaced persons.

As for the Odessa region, only one settlement is included in the List – the Vilkovo urban territorial community (the village of Beloe). The city of Odessa and other settlements are not included.

As it became known to us, on April 27-28, 2022, based on the said Order, the tax authorities began to require business entities, in particular of the city of Odessa, to pay the above budget payments.

However, in our opinion, such a tax requirement is premature, since, in accordance with the provisions of the Tax Code, a special list should be determined and approved by the Cabinet of Ministers, and not by the Ministry for Reintegration in pursuance of the requirements of the Cabinet of Ministers’ resolution establishing the procedure for paying state subsidies for residence to internally displaced persons.

In the event that you receive a tax letter of the appropriate content, we are ready to immediately respond and prepare a reasonable response.

Additionally, we recall that if the taxpayer is unable to comply with the deadlines for paying taxes and fees, as well as reporting, taxpayers are exempted from the liability provided for by the Tax Code with the mandatory fulfillment of such obligations within six months after the termination or cancellation of martial law in Ukraine.