Tax details of martial law: what business should pay its attention to

The imposition of Martial Law and current realities require the legislator to respond quickly in terms of improving legal regulation in various sectors of life. 

Single Social Contribution (SSC) during Martial Law

On 17 March - 2022, the Law of Ukraine “About Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine Concerning the Effect of Norms for the Period of Martial Law” № 2120-IX dd 15 March - 2022 entered into force. This Law (item 10, item 3 of Section II) supplements the Final and Transitional Provisions of the Law № 2464-VI on Single Social Contribution (SSC) with new items 9-19, 9-23. According to paragraph 9-19 of Section VIII of Law № 2464-VI, temporarily starting from 1 March - 2022 until the termination or abolition of Martial Law in Ukraine and during 12 months after the termination or abolition of Martial Law, persons engaged into independent professional activity (including notary), have the right to not accrue, calculate or pay a single contribution.

Also the provision of the second paragraph of item 2 of the first part of Article 7 of Law № 2464-VI for such periods does not apply to the given persons.

That is, it is not applicable the norm which stipulates that if the payer does not receive any income (profit) in the reporting period or a separate month of the reporting period, such payer has the right to determine the accrual base, but not more than the maximum amount of accrual base № 2464-VI, while the amount of the single contribution may not be less than the minimum insurance fee.

The provisions of items 9-22, 9-23 of Section VIII of Law № 2464-VI define the following:

Temporarily, for the period of the legal regime of Martial Law, state of emergency and within 3 months after the termination or cancellation of Martial Law, state of emergency, single payers are not charged a penalty, and the penalty for these periods is subject to write off.

A moratorium has been established on conducting documentary audits on the correctness of accrual, calculation and payment of the single contribution for the period of Martial Law, state of emergency and during 3 months after the termination or cancellation of Martial Law.

Documentary audits on the correctness of accrual, calculation and payment of the single contribution, started before 24 February - 2022 and not completed, are suspended until the last calendar day of the third month from the date of termination (cancellation) of Martial Law, state of emergency.

Audits

Now let's talk about the issue that is perhaps the most painful for taxpayers (even in peacetime). First of all, the changes affected the actual audits.

The inspection carried out at the place of actual implemention of the taxpayer activity, location of economic or other objects of the property right of such taxpayer is considered actual. Such inspection is carried out by the supervisory body on compliance with legislation on cash circulation, the procedure for taxpayers to make settlement transactions, cash transactions,

licenses, certificates, including the production and circulation of excisable goods, compliance by the employer with legislation on employment contracts, registration labor relations with employees (wage-workers) (item 75.1.3 of the Tax Code of Ukraine).

In particular, the adjusted grounds for their conduction are so specified that the basis for the actual inspection can be:

1) availability and/or receipt of information from state bodies or local self-government bodies in accordance with the procedure established by law, which indicates that the taxpayer does not provide the opportunity to pay for goods (services) using electronic means of payment (changes to point 80.2.2 of the Tax Code of Ukraine);

2) a written request of the buyer (consumer), executed in accordance with the law, on failure of the taxpayer to make payments for goods (services) using electronic means of payment (changes to point 80.2.3 of the Tax Code of Ukraine).

In addition, the moratorium on factual inspections for the period from 18 March - 2020 to the last calendar day of the month (inclusive), which ends the quarantine established by the Cabinet of Ministers of Ukraine throughout Ukraine to prevent the spread of coronavirus disease in Ukraine (COVID -19). Please note that such a moratorium was enshrined in paragraph 522 point 10 Article XX of the Tax Code of Ukraine.

At the same time, the recently added norm to the Tax Code of Ukraine, according to which for the period before the cessation or abolition of Martial Law in Ukraine the tax inspections do not begin and initiated inspections are stopped (paragraph 69.2 of point 10 of Article XX of the Tax Code of Ukraine), is set out in a new version.

Now the latter one determines that for the relevant period tax audits do not begin and the ongoing audits are stopped, EXCEPT OF:

1) office audits of declarations or clarifying calculations (if any) to which an application for refund of the amount of budget reimbursement is submitted, the indicators of which are formed on the basis of tax invoices and/or adjustment calculations compiled and registered in the Unified Register of Tax Invoices, and/or customs declarations, except for goods (products) specified in points 215.3.1, 215.3.2, 215.3.21 and 215.3.31 of the Tax Code of Ukraine. Such office audit of the tax return or adjustment calculation may be carried out within 90 business days following the last day of the deadline for their submission and if such documents were submitted later - on the day of their actual submission;

2) factual audits.

In case of violations of the law as a result of the above inspections, taxpayers are held liable in accordance with the Tax Code of Ukraine, laws controlled by regulatory authorities, and legal requirements for a moratorium (suspension) of penalty (financial) sanctions (fines) for the period actions of Martial Law, state of emergency and/or for the period of quarantine established by the Cabinet of Ministers of Ukraine throughout Ukraine in order to prevent the spread of coronavirus disease (COVID-19), in this case do not apply, including the provisions of point. 112.8.9 of the Tax Code of Ukraine.

Temporary exemption from certain tax liabilities

First, temporarily for the period from 1 March - 2022 till 31 December of the year following the year in which the Martial Law or the state of emergency was terminated or cancelled, it is not accrued or payed land fees (land tax and rent for land plots of state and communal property) for:

1) land plots (farmland allotment (shares)) located in the territories where hostilities are being conducted (have been conducted) or in the territories temporarily occupied by the armed forces of russia which are owned or used, including the rent terms of individuals or legal entities,

2) land plots (farmland allotment (shares)), determined by the regional military administrations as littered with explosive objects and/or containing fortifications.

The corresponding norm is specified in point 69.14 of Article 10 Chapter XX of the Tax Code of Ukraine.

Secondly, temporarily for the tax (reporting) years of 2022 and 2023, it will not be accrued and payed the total minimum tax liability for land plots located in the territories where the hostilities are (were) conducted or in the territories temporarily occupied by armed formations of russia and/or for land plots determined by regional military administrations as littered with explosive objects and/or containing fortifications (point 69.15 of Article 10 Chapter XX of the Tax Code of Ukraine).

Thirdly, temporarily for the tax (reporting) year of 2022, it will not be accrued and payed environmental tax on taxable objects located in the territories where the hostilities are (were) conducted or in the territories temporarily occupied by the armed forces of russia (point 69.16 of Article 10 Chapter XX of the Tax Code of Ukraine).

Other

Among other important aspects related to the general issues of administration of taxes and fees are:

1. Temporarily for the period before the termination or abolition of Martial Law, state of emergency on the territory of Ukraine, in order to protect the rights of taxpayers, preserve and protect data, provide electronic services and receive electronic documents from the taxpayers was established on working days from 8.00 am to 6.00 pm (point 69.18 of Article 10 Chapter XX of the Tax Code of Ukraine).

2. Temporarily for the period before the cessation or abolition of Martial Law, state of emergency on the territory of Ukraine, it is stopped for the controlling bodies the time limits established for registration in the controlling bodies of legal entities and their separate subdivisions as taxpayers at the main place of registration or physical persons - entrepreneurs at the tax address and transfer of data on registration of such taxpayers in the supervisory authorities in the Unified State Register of Legal Entities, Individuals - Entrepreneurs and Public Associations (point 69.19 of Article 10 Chapter XX of the Tax Code of Ukraine). Again, one can only hope that the controllers will not intentionally delay the relevant deadlines.

3. The property of the taxpayer shall be released from the tax lien from the date of receipt of the decision of the head of the military-civil administration on the seizure of property without the application of the requirements of Article 92 of the Tax Code of Ukraine. Thus, in the case of paid confiscation of property such funds are used to repay the tax debt of the taxpayer whose property was confiscated (point 69.21 of Article 10 Chapter XX of the Tax Code of Ukraine).