Ukraine: Tax Reliefs and other Legislative Changes in the Covid-19 Time

published on 6 April 2020 | reading approx. time 5 minutes

The global Covid-19 pandemic forced Ukrainian government to introduce unprecedented restrictions for businesses and the public, aimed at preventing the spread of the virus. To mitigate the negative effect of the restrictions, Ukrainian parliament has recently passed a number of laws introducing tax reliefs for businesses and changes to the work of public institutions.

     
The overview of the changes in tax and other areas introduced by the Law No. 533-IX of 17 March 2020 and by the Law No. 540-IX of 30 March 2020, is provided below:

• Changes in taxation and financial reporting »

• Changes in the procedural laws »

• Other legislative changes »

• Changes introduced by decisions of the Cabinet of Ministers of Ukraine »

Changes in taxation and financial reporting

• Exemption from land tax, land lease fee and from real estate tax in respect of non-residential property is granted for the period from 1 March to 31 March 2020. The real estate tax for April 2020 can be paid until 30 June 2020, without delay interest and penalties.
• Employers qualifying as small or medium-sized businesses can apply for state aid in connection with “partial unemployment” for employees in the event of stoppage (reduction) of production due to the Covid-19-related measures. Small businesses are individual entrepreneurs and legal entities, whose average annual number of employees is from 11 to 50 persons, and annual income - from 2 million Euro to 10 million Euro (at the average annual exchange rate of the National Bank of Ukraine). For medium-sized businesses, these indicators range from 51 to 250 people, and from 10 million Euro to 50 million Euro, respectively.
• No penalties can be charged for violation of tax laws committed from 1 March to 31 May 2020, except for penalties for violation of the rules for accrual, reporting and payment of value added tax, excise tax and royalties (for natural resources), as well as for violations related to non-state agreements insurance, circulation of fuel and ethyl alcohol, and for the alienation without consent of the tax authority of the property which is subject to tax lien.
• The time period for challenging decisions of tax authorities in an administrative appeal procedure and for consideration of claims of the taxpayers (except for claims for VAT refunds) that were submitted or will be received before 31 May 2020, and/or which were not considered as of 18 March 2020, is suspended until 31 May 2020.
• No delay interest can be charged on tax debt in the period from 1 March to 31 May 2020, and write-off of the delay interest accrued for this period, but not paid.
• The deadline for filing of annual tax declaration on property and income for individuals extended until 1 July 2020, and the deadline for the payment of declared income tax extended until 1 October 2020.
• All documentary audits and physical inspections are stopped/suspended from 18 March to 31 May 2020, except for the audits related to VAT refund and physical inspections related to circulation of fuel, ethyl alcohol, alcoholic beverages and tobacco products. Ongoing audits are suspended until 31 May 2020, and such suspension does not require any additional decision of the tax authority.
• The running of the statute of limitations, the expiry of which excludes assessment of tax liabilities, is suspended from 18 March to 31 May 2020. The general statute of limitations is 1,095 days (3 years), and for operations subject to transfer pricing rules – 2,555 days (7 years).
• Exemption from payment of single social security contribution is granted from 1 March to 30 April 2020 to individual entrepreneurs, individuals carrying out independent professional activities, and members of farms, for themselves. Such persons can voluntarily pay single social security contribution for the mentioned period.
• No penalties can be charged for the failure to pay single social security contribution and for the late submission of social security reports for the period from 1 March to 31 May 2020.
• Annual income limits for individual entrepreneurs and legal entities who are subject to the simplified tax system are increased as follows:
  • 1 group – from UAH 0.3 million to UAH 1 million;
  • 2 group – from UAH 1.5 million to UAH 5 million;
  • 3 group – from UAH 5 million to UAH 7 million.

• Goods meant to counteract spreading of Covid-19 in Ukraine are exempted from VAT and import duties. The exemption is valid until end of the quarantine and applies to the goods approved by the Cabinet of Ministers.

• The value of charitable contributions (cash, cost of goods included in the list approved by the Cabinet of Ministers) transferred to charitable organizations and healthcare institutions, can be deducted in full amount for tax purposes. The tax adjustment (increase of financial result before tax) pursuant to Paragraph 140.5.9 of Article 140 of the Tax Code does not apply.

• The time period for the issuance of individual tax rulings by the tax authorities and the time period for responding to requests of tax authorities by the taxpayers (except for requests related to VAT refund and / or VAT credit) is suspended until 31 May 2020.

• The mandatory use of cash registers is postponed:

  • until 1 August 2020, for single taxpayers of groups 2 - 4, regardless of the business activity, with annual income not exceeding UAH 1 million, except for taxpayers selling technically complex household goods, medicines and medical products;

  • until 1 April 2021, for single taxpayers of groups 2 - 4, regardless of the business activity, with annual income not exceeding UAH 1 million, except for taxpayers selling goods and services via Internet, technically complex household goods, medicines, medical devices, healthcare services and carrying out certain other activities

• No penalties can be charged for late publication of financial statements for 2019 or the consolidated financial statements for 2019 together with the audit report, if such reports are published during the quarantine period, or within 90 calendar days from the day following the day the quarantine ends, but no later than 31 December 2020. This rule also applies to companies which issued securities.

Changes in the procedural laws

• During quarantine period, the parties can participate in court hearings outside the court via video conference using their own technical means. A person who has no digital signature may confirm the identity using a document proving the citizenship of Ukraine (passport), identifying the person or special status of the person.
• The court may restrict access of persons who are not parties of a court case to the court hearing, if the participation of such person in the court hearing will result in a threat to human life or health.
• The running of procedural time periods is suspended during the quarantine.

Other legislative changes

• The rendering of administrative services and the processing of documents by the state authorities are suspended for the period of the quarantine and respective time periods are extended for the time of suspension.
• The privatization (sale) of the large privatization objects is suspended for the period of the quarantine and other restrictive measures.
• The flexible working time regime and the rules for remote work of employees have been introduced to the Labor Code of Ukraine.
• The tenants are relieved from paying rent for the use of real estate during the quarantine, provided this is agreed with the landlord (owner).
• The scheduled measures of state control in the field of economic activity are suspended until 30 June 2020.
• The banks may not raise interest rates on the loans.
• The government has the right to limit the prices for anti-epidemic products and for social products for the period of quarantine.

Changes introduced by decisions of the Cabinet of Ministers of Ukraine

• The quarantine was extended and an emergency situation regime was introduced throughout the territory of Ukraine until 24 April 2020. The emergency situation regime does not suppose state intervention in the activities of enterprises or the restriction of human rights and freedoms, but all legal entities and individuals must comply with anti-epidemic and other measures.
• A number of restrictions apply during the quarantine period, in particular:
  • mass gatherings are prohibited;
  • staying in public places without personal protective equipment (a respirator or face mask) is prohibited;
  • visiting parks, squares, recreation areas, forest parks and coastal areas, children's and sports grounds is prohibited;
  • movement of group of persons of more than two persons is prohibited;
  • the work of public catering and foodservice businesses, shopping and entertainment centers, state authorities and local authorities, retail and consumer services businesses is restricted;
  • the passenger transportation in suburban, intercity and interregional connections is prohibited, the transportation of persons by local public transport is allowed subject to certain restrictions;
  • employers are recommended to organize shift work for employees or remote work (home office) via Internet, where possible.