On 15 March 2022, the Verkhovna Rada of Ukraine adopted the Law of Ukraine "On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine concerning the effect of regulations for the period of martial law" № 2120-IX.
It provides for significant changes related to the application of the simplified tax regime, taxation of excisable goods, charitable assistance, other changes to tax legislation, as well as to civil, banking legislation, and other laws.
This law enters into force on 17 March 2022.
Unless stated otherwise, all the following amendments are valid for the period of martial law in Ukraine until its termination or abolition in the manner prescribed by law.
Amendments to tax legislation
From 1 April 2022, private entrepreneurs - payers of the single tax of the first and second groups, have the right not to pay the unified tax.
Legal entities of any organizational and legal form and private entrepreneurs can become payers of the single tax of the third group if during the year their income does not exceed UAH 10 billion. Key details of the updated regime:
(a) rate – 2% of income;
(b) VAT on supply of goods and services within the customs territory of Ukraine does not apply;
(c) limitation of the number of employees shall not apply.
Certain taxpayers can not benefit from the new regime, including
(i) companies engaged in the production, export, import, sale of excisable goods; mining, sale of minerals;
(ii) banks, credit unions, pawnshops, leasing companies, insurance companies, investment funds and companies, other financial institutions;
(iii) non-resident individuals and legal persons and some other taxpayers.
The Cabinet of Ministers of Ukraine may determine the procedure for payment of the unified tax.
The operations on import and supply of special personal protective equipment, other defined defense goods, medicines defined by the Cabinet of Ministers of Ukraine are VAT-exempt.
From 24 February 2022, the "deemed" supply rules for VAT purposes shall not apply in relation to goods destroyed during martial law, transferred to state or municipal ownership, in favor of volunteer groups and others for the needs of Ukraine's defense.
The provision of goods and services shall not be considered as supply operations when they are transferred/provided to the Armed Forces, National Guard, and other military bodies for the defense of Ukraine, and/or medical institutions, except when such transactions for the supply of goods and services are taxed at zero VAT.
It is allowed to recognize VAT credit on the basis of primary documents for the purchase of goods/services where tax invoices have not been registered (subject to their registration within 6 months after the termination of martial law).
Transactions on supply and import to the territory of Ukraine of gasoline, heavy distillates, and liquefied gas, which are subject to an excise tax rate of 0.00 euros per 1,000 liters, as well as oil or petroleum products under certain codes, are subject to VAT at the reduced rate of 7%.
Corporate income tax
The following shall not constitute a violation of activities of non-profit organizations: transfer of property, provision of services, use of income to finance expenditures if such services are provided and funds are transferred to government agencies for the defense of Ukraine, and/or funds are transferred to special accounts opened by the NBU to raise funds.
For gasoline, other petroleum products, heavy distillates, liquefied gas, propane, isobutane, the excise tax rate is set at 0.00 euros per 1,000 liters.
Forced transfer of fuel for state needs, transfer of fuel for the needs of military and law enforcement agencies or medical institutions, its transfer as humanitarian aid, are not considered to be the sale operations.
The tax liability for lost excisable goods does not arise if the excisable goods are forcibly alienated or confiscated for the needs of the state, transferred for the needs of state defense, and/or medical institutions, provided as humanitarian aid.
From March 2022 to December 31 of the year following the year in which the martial law will be terminated, no land tax and land lease (for land plots of state and communal property) shall be paid for lands and shares located on the following territories:
(a) on which combat actions are conducted;
(b) the temporarily occupied territories as determined by the Cabinet of Ministers of Ukraine;
(c) which are defined as contaminated with explosive objects and/or which contain fortifications.
For the 2022 and 2023 tax years, the total minimum tax liability is not payble for land located on the abovementioned territories.
For the 2022 tax year, the environmental tax shall not be paid regarding facilities located on the territories where combat actions are conducted or temporarily occupied by armed groups according to the list specified by the Cabinet of Ministers of Ukraine.
Personal income tax
Based on the results of 2022, the taxpayer's tax discount includes the amount of funds or the value of the property transferred in the form of donations or charitable contributions to non-profit organizations, in the amount not exceeding 16% of the total annual taxable income.
Certain expenditures related to the defense of the state may be recognized as expenses of self-employed persons and private entrepreneurs (except for those who have chosen a simplified tax system).
New categories of income that are not included in the total taxable income are introduced (in particular, charitable contributions for the benefit of combatants, individuals living in the settlements where hostilities are conducted, and/or temporarily displaced persons, in the amounts set by law, the amount of charitable assistance provided by certain international charitable organizations).
Unified social security contribution
From 1 March 2022 until the termination of martial law, as well as for twelve months after such termination, private entrepreneurs, persons engaged in independent professional activity, members of the farming enterprise, have the right not to pay a unified social security contribution for themselves.
For the period of mobilization, employers – unified tax taxpayers who have chosen the simplified taxation system, private entrepreneurs belonging to the second and third groups of single tax taxpayers, as well as legal entities belonging to the third group of single tax taxpayers - have the right not to pay the unified social security contribution for employees called up for military service in the Armed Forces of Ukraine.
Fines and penalties for violations in connection with the payment of the unified social security contributions shall not be applied during martial law and three months after its termination.
(a) Until the termination of martial law, tax audits will be suspended, and no new ones will be conducted, except for:
(i) actual audits, in particular on the possibility of payment by card. The moratorium on conducting actual tax audits for the period of quarantine was also lifted;
(ii) desktop audits of declarations or adjustments for which an application for a refund has been made.
(b) The time limits set by the Tax Code of Ukraine, other legislation, the control of which is entrusted to the controlling tax authorities, shall be suspended.
(c) Taxpayers shall not be reimbursed for damage caused by inaction of the tax authorities in connection with the operation of the legal regime of martial law or state of emergency.
(d) Default interest for violations of tax legislation resulting from the imposition of martial law or state of emergency shall not be charged and the accrued default interest shall be annulled.
Amendments to banking, credit and anti-money laundering legislation
Banks are prohibited from issuing blank loans.
For the period of martial law, as well as for four months after its termination, the NBU has no right to classify the bank as problematic if it has violated the minimum capital adequacy ratio or liquidity ratio for 30 consecutive days.
For the period of martial law, as well as for six months after its termination, the NBU has no right to classify the bank as insolvent in case of reduction of regulatory capital adequacy ratio and/or fixed capital adequacy ratio by 50% or more of the minimum level.
Requirements for financial monitoring are simplified - the bank shall not verify the source of funds when they are deposited by an individual in cash to his own account if the amount meets the thresholds. In this case, such funds cannot be used for expenditure operations, in particular, their transfer and issuance in cash, except for transfers to the NBU accounts to support the Armed Forces and/or humanitarian aid. After the termination of martial law, the bank may resume expenditure operations after verifying the source of origin of such previously deposited funds.
For the period of martial law, as well as within 30 days after its completion, the debtor under the consumer loan agreement shall be released from liability in case of indebtedness, including a penalty and other payments for non-performance of obligations to pay under the loan agreement.
It is prohibited to increase the interest rate for the use of consumer loan in case of default by the debtor under the loan agreement. The penalty and other overdue payments accrued from 24 February 2022 under the consumer loan agreement are subject to write-off.
For the period of martial law, as well as within 30 days after its completion, it is prohibited to foreclose the real estate mortgaged by Ukrainian citizens in favor of banks under the consumer loans by means of acquiring ownership to the mortgage, its sale, including at electronic auctions.
Residents of residential buildings and premises subject to foreclosure cannot be evicted.
These restrictions do not apply if the loan agreement is executed after the entry into force of this law or if they have been subsequently amended in terms of extension and / or reduction of interest rates and penalties.
Amendments to other legislation
During the period of martial law in Ukraine, the statute of limitations, both general and special, determined by the Civil Code of Ukraine, shall be extended for the period of martial law.
Licenses for the production and circulation of alcohol, alcoholic beverages, tobacco products, and liquids used in electronic cigarettes; production, storage, wholesale and retail trade of fuel, and places of production, storage, wholesale and retail trade of fuel, for which the next payment has not been made or which are expired, shall be considered valid. Such payments and renewal of the license shall be made within 30 days after the cessation of martial law.
Import and sale of tobacco products are allowed with labeling in accordance with the requirements of the EU member state - manufacturer of such products without complying with the labeling requirements under Ukrainian law. Their circulation is allowed up to three months after the cessation of martial law.
Penalties for violation of the medical warning requirements for consumers of tobacco products and packaging requirements shall not be applied to such products.
Sanctions for violation of the requirements for the use of cash registrars shall not be applied, except for sanctions for violation of the procedure for operations for the sale of excisable goods.