Home / Publications / Ukraine: Tax relief measures for businesses introduced...

Ukraine: Tax relief measures for businesses introduced for the duration of martial law

12 April 2022

On 15 March 2022, Ukrainian parliament passed draft law No 7137-д, which adopts tax measures aimed at supporting businesses and people during wartime.

The key measures applicable to businesses include:

Extending simplified tax regime to wide range of businesses

Starting from 1 April 2022 and for the duration of martial law, Ukrainian businesses (including legal entities and private entrepreneurs) with annual gross income of no more than UAH 10 billion (EUR 300 m) may opt for a simplified tax regime. Exceptions apply to businesses engaged in gambling, currency exchange, import and sale of excise products, mining, insurance (reinsurance) and financial services, as well as to foreign individuals and companies.

Businesses that opt for the simplified tax regime are liable to pay unified tax in the amount of 2% of total gross income and are exempted from VAT. This unified tax will be due on a monthly basis.

Introducing VAT exemptions and special regime of VAT administration

For the period of martial law, VAT invoices on the supply of goods and services may not be registered in the Unified Register of Tax Invoices. During this time, taxpayers may recognise input VAT on the purchase of goods and services based on available primary documents without registered VAT invoices. Taxpayers are obliged to ensure registration of all postponed VAT invoices and verification (i.e. adjustment) of the recorded input VAT within six months after the martial-law period ends. 

Starting from 24 February 2022 and for the entire duration of martial law, VAT payers are allowed to preserve input VAT recorded from the purchase of goods, which were subsequently lost, destroyed, or transferred for defensive needs. 

According to the draft law, the following operations will be exempt from VAT:

  • Import and supply of individual protective equipment (e.g. helmets, vests, components used for their production) for the needs of law enforcement and the armed forces, including territorial defence units;
  • Listed pharmaceuticals and medical devices (including those without state registration in Ukraine) for use by medical institutions for providing medical help during wartime;
  • Listed defence goods in accordance with applicable legislation for procurement of goods for defensive purposes.

Decreasing tax burden on supply of fuel

For the period of martial law, import and supply of fuel for motor vehicles is subject to reduced VAT rate of 7% (instead of the general 20% rate) and is fully exempt from excise taxes. 

Providing relief from land tax and environmental tax

The draft law introduces exemption for land tax (including land lease payments for state and communal land) for the land located within the territories affected by military actions or temporarily occupied by Russian Federation forces. This exemption will apply from March 2022 until 31 December of the year following the year in which martial law ends. In addition, the minimum tax liability will not be due for 2022 and 2023 with respect to land plots located within specified territories.
Similarly, taxpayers will be exempt from environmental tax for 2022 for objects located within the territories affected by military actions or temporarily occupied by Russian Federation forces

Suspending tax audits, statutory terms and application of interest penalties

The draft law reiterates the moratorium on conducting tax audits for the period of martial law, except for chamber audits of filed tax returns requesting budgetary refunds of VAT and for factual audits. 

For the duration of martial law, all statutory terms set under tax legislation are suspended. The suspension extends to all the terms set for taxpayers (e.g. deadlines for filing of tax returns, payment of tax liabilities), and for the tax office (e.g. terms for responding to requests, statute of limitations). In addition, the interest penalty for late payment of taxes does not apply if delay is caused by the effects of martial law. 

Apart from the extended measures for businesses, the draft law also introduces relaxed rules for the operation of non-profit organisations and additional tax relief for individuals in the context of charity activities during the martial-law period. 

The draft law is expected to go into effect once it is signed by the President of Ukraine and published. 

For more information on this tax law and business operations in Ukraine during the current state of war, contact CMS experts.

Disclaimer: Please note that this material is prepared based on the latest draft available publicly at: Картка законопроекту - Законотворчість (rada.gov.ua). We may not exclude that the final published version of the law may be different. 

Authors

Portrait ofIhor Olekhov
Ihor Olekhov
Partner
Kyiv (CMS CMNO)
Portrait ofViktoriia Stavchuk-Mulundkar
Viktoriia Stavchuk-Mulundkar
Senior Associate
Kyiv (CMS CMNO)