Tax and Legal updates (12.04.22)

The list of taxpayers who can switch to the simplified taxation system with the rate of 2% is extended, in particular, the transition to the simplified system is allowed for importers of cars and other vehicles.

Single taxpayers of the third group, applying the rate of 2%, are exempted from the obligation of:

• VAT accrual and payment on the following transactions:
  • supply of goods, works, and services, the place of supply of which is located in the customs territory of Ukraine
  • import of goods into the customs territory of Ukraine
• submission of VAT tax returns

Exemption from VAT does not apply to the import into the customs territory of Ukraine and their further supply of goods originating from the country recognized as the occupant state and/or recognized as the aggressor state.

For taxpayers registered as VAT payers for the period of application of the single tax at the rate of 2%, registration as a VAT payer is suspended. And the operations performed during this time are considered as not subject to VAT.

After the resumption of registration as a VAT payer, business entities (not later than the last day of the reporting period in which there was a resumption of registration) must accrue "adjusting" tax liabilities for VAT on goods, services, and non-current assets purchased, manufactured with VAT prior the transition to the simplified system and used/sold in non-taxable transactions when applying the single tax at a rate of 2%.

The tax (reporting) period for single taxpayers of the third group applying the 2% rate is a calendar month. The tax return shall be submitted to the controlling body within the terms established for the monthly tax period, except for some exceptions.

The amount of tax liability is payable within 10 calendar days following the last day of the relevant deadline for the monthly tax (reporting) period (except the certain cases: individual taxpayers and those who are required to determine the minimum tax liability binding of single taxpayers).

The tax base for such transactions is defined as:

• book (residual) value of non-current assets at the beginning of the reporting (tax) period during which non-taxable transactions are performed (in the absence of accounting for non-current assets - the usual price);
• based on the cost of purchase of goods and services.

From April 1, 2022, transactions on import of goods into the customs territory of Ukraine by single taxpayers of the first, second, and third groups (except for individuals and legal entities that apply a 3% single tax rate, are exempted from VAT).

From April 1, 2022, the import of cars and other vehicles by individuals is exempted from VAT and excise tax.

These exemptions do not apply to goods in case:

• their country of origin is the aggressor state (occupant state);
• they are imported from the territory of the occupant (aggressor) state and/or the occupied territory of Ukraine.

For the 2021 and 2022 tax years, the real estate tax is not accrued and paid for residential real estate located in the territories where hostilities are conducted (were conducted), or in the territories temporarily occupied by the aggressor state and for housing real estate that became uninhabitable in connection with the military aggression against Ukraine.

The list of such areas and the procedure for recognizing residential property uninhabitable is determined by the Cabinet of Ministers of Ukraine.

From March 1, 2022, through December 31 of the year of termination/abolition of martial law, no real property tax, other than land, shall be assessed or paid for non-residential real property located in the areas of hostilities/temporary occupation.

Taxpayers-legal entities within six calendar months after the date of termination of martial law may submit an adjusting tax declaration, which reflects the changes in the tax liability for real estate tax for the relevant tax period.

Temporarily from January 1, 2022, to December 31 of the year in which martial law is terminated, environmental tax is not charged and paid by payers of this tax, registered at the location of the sources of pollution in the territories where hostilities are taking place or in the territories temporarily occupied by the aggressor state. The list of such territories is determined by the Cabinet of Ministers of Ukraine.

The term of tax obligations fulfillment has been extended to 6 months after the cessation or cancellation of martial law in Ukraine.

In-house inspections of tax returns of single taxpayers of the fourth group have been resumed.

Also, please be informed that on April 1, 2022, the draft Law №7234 "On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine on the administration of certain taxes during martial law, state of emergency" was adopted. The Law provides for:

• Introduction of additional changes to the simplified regime of taxation of legal entities by the single tax of the third group. In particular, the income criteria of UAH 10 billion for the transition to a simplified taxation system might be abolished.
• Clarification of certain issues on income tax during the temporary transition to the payment of a single tax of the third group (tax losses, advance payments of income tax, etc.)

 Currently, the Law has been submitted to the President of Ukraine for signature and would come into force from the date of its promulgation.

1. The Order of the Ministry of Justice of Ukraine of 01.04.2022 No. 1307/5 established the List of administrative-territorial units at which users access to the State Registers, held by the Ministry of Justice of Ukraine, is terminated in martial law.

2. Notaries who carry out their activities in administrative-territorial units not included in the List established by the Order of the Ministry of Justice of 01.04.2022 № 1307/5, have access to the following State Registers and may perform certain notarial activities in respect of:

• Unified Register of special forms of notarial documents;
• Succession Register;
• Unified Register of Powers of Attorney;
• State Register of Civil Status Acts;
• Electronic register of apostilles;
• State Register of Encumbrances on Movable Property;
• Unified State Register of Legal Entities, Individual Entrepreneurs and Public Associations (to get information from the Register, including constituent documents (for review), as well as provide extracts from the USR at the request of individuals and legal entities).

We recommend pre-check with the notary the possibility of performing a notarial act in the relevant Register in each case (including depending on the region).

The Unified State Register of Legal Entities, Privat Entrepreneurs and Public Associations is resuming the work under the material law. To date following registration actions are performed:

• Establishment of the charitable organizations and public associations, amendments to the information on them, including the charters;
• Establishment of the limited liability companies, establishment of the farm business, establishment of the public formation for the protection of public discipline and the state border;
• Amendments to the information on the head of the legal entity and on other persons (if any) empowered to act on behalf of the legal entity, except for public formations;
• Amendments regarding the location of the legal entity;
• Amendments to the charter documents of the legal entity, except the changes regarding the amount of the charter capital, changes of the founders (shareholders) and / or the amount of their shares;
• Amendments of types of economic activity of the legal entity;
• Establishment of state authorities, local governments, treasury entity, state-owned entity, communal entity, communal organizations (institutions, establishments), state organizations;
• Establishment of the subdivision of the legal entity, amendments to the information on the subdivision of the legal entity, termination of the subdivision of a legal entity;
• Amendments to the information on subdivision of the foreign non-government organization, representative office, branch of the foreign charitable organization;
• Registration of the decision on termination of the legal entity;
• Registration of private entrepreneur, termination of private entrepreneur, amendments  to information on private entrepreneur, placing the information on private entrepreneurs registered before July 1, 2004 in the state register.

The abovementioned registration actions can be carried out on the extraterritorial basis, meaning regardless of the location of legal entities, private entrepreneurs or public associations.

To date not all administrative service providers can perform registration actions in the USR, therefore, it is recommended to clarify the possibility of performing registration action in each case.

Under martial law it is possible to obtain the following services in some regional employment centers (on an extraterritorial basis):

• obtain a work permit for a foreigner (regardless of the location of the employer);
• extend the validity of the work permit (regardless of the original place of obtaining the permit);
• make changes to the work permit (regardless of the original place of obtaining the permit).

To date, not all administrative service providers provide relevant services, so it is recommended to clarify this possibility in each case.