Business met with the Chairperson of the VRU Committee on Finance, Taxation, and Customs Policy

08/ 04/ 2022

On April 8, the European Business Association met with Danylo Hetmantsev, Chairperson of the VRU Committee on Finance, Taxation, and Customs Policy. The meeting was dedicated to taxes and customs, as well as the issue of companies working with russia, etc. Mr. Hetmantsev stressed that in the context of the war two economic models were discussed at the start. The first one implies an increase in taxes so that the maximum can be collected for the army and military activities. The second one liberalizes the economy from administrative and tax pressures. These include allowing companies to pay minimum taxes – only the most important ones, simplifying the customs and import of goods into Ukraine, abolishing licenses, and introducing a 2% turnover tax, zero credit, etc. Thus, the state chose the second option of development. Surely, the decision is risky but the economic results will be seen at the end of April. Only then, the appropriate conclusions can be made. At the same time, Mr. Hetmantsev emphasized that there would be changes in the existing tax system. Regarding post-war taxation, Mr. Hetmantsev stressed that it should fit into the Marshall Plan. Namely, it should consider the restoration of infrastructure & housing, the reinforcement of military capabilities (which is now a priority, and most of the tax revenues will go to the military-industrial complex accordingly), and the post-war economic restructuring. Reform of the judiciary and other unpopular reforms that did not take place in Ukraine will be resumed after the war. And, in fact, the tax system of the future is not about tax exemptions, but about fair redistribution, where entire industries will not be able to take advantage of reduced taxation. Besides, Mr. Hetmantsev stressed the need for the Ukrainian economy to integrate with the EU market. After all, we hope that in the near future Ukraine will receive the status of an EU candidate country. Danylo Hetmantsev also called on business representatives to pay taxes. Thus, the state emphasized the importance of paying taxes in advance at the start of the war. Besides, the state provided all necessary clarifications regarding the non-submission or late submission of declarations or non-payment of taxes. And, surely, if the company is on the territory of active hostilities, no sanction will be imposed on it. However, if the company is located in a “peaceful” area, its decision not to file a declaration for 2021 citing the war will be considered immoral. And the authorities will not perceive it as acceptable. Therefore, Mr. Hetmantsev called for a very conscious approach to these issues. Business needs to help the country by paying taxes. The adopted laws on the seizure of property belonging to the russian federation and draft law № 7232 on increased taxation of companies with economic ties with rf were discussed. The Chairperson stressed that there is a reason to worry if a company has affiliated companies in russia. The authorities, on behalf of Ukraine, also appealed to European countries to impose sanctions on companies that still work with the russian federation. In Ukraine, companies have to declare their connections with russia (details in draft law №7232). Accordingly, companies have 1.5 years to withdraw from russia and complete all legal processes on exodus. There will not be a tax increase for the company that starts the severance of its economic ties with rf (income tax, environmental tax, rental property tax). If the company does not declare that it works with Russia, but if this fact becomes known after 3 years, the company will have to pay extra taxes for this period. Currently, the declaration on ties with russia is to be made voluntarily by the companies. The draft law was adopted in the first reading. Parliamentarians are ready to listen to business, so there is an opportunity to submit amendments to the draft law. It was agreed that the EBA will promptly collect the comments from our member companies and send them to the VRU Committee in the coming days. Another important issue that arose was the restoration of VAT refunds. Mr. Hetmantsev noted that the Cabinet of Ministers is currently working on the issue so that at least companies of strategic importance can have VAT partially refunded. However, those who do not pay taxes, as well as those who do not submit any declarations on the cooperation with russia, and continue to do business with it, will not get refunds. Meanwhile, the registration of tax invoices will not be resumed until the end of the war – there is an official tax clarification on that. The issue of critical imports was also discussed. Danylo Hetmantsev stressed once again that critical imports refer to things that cannot be produced in Ukraine. If the production is possible then it does not fall under the category of critical imports. Therefore, the company needs to prove that its products are critical. Regarding the compensation for destroyed property, the Chairperson said that the development of such a mechanism is underway. The issue of RSO was also raised. Indeed, businesses are exempted from fines for not using the RSO during the martial law and six months later. However, no one has lifted the obligation to install them. The country will continue its course on cashless, so those who do not work with cards will be fined after the situation in Ukraine stabilizes. We also discussed such issues as RES, state support for producers, and so on. At the end of the meeting, Mr. Hetmantsev stressed that the next week or two will be decisive in the context of martial law. Nevertheless, everyone is hoping for peace to prevail as soon as possible! We truly thank Danylo Hetmantsev for the meeting, and his willingness to talk with business, and consider the EBA proposals. Therefore, we look forward to further cooperation!

Mr. Hetmantsev stressed that in the context of the war two economic models were discussed at the start. The first one implies an increase in taxes so that the maximum can be collected for the army and military activities. The second one liberalizes the economy from administrative and tax pressures. These include allowing companies to pay minimum taxes – only the most important ones, simplifying the customs and import of goods into Ukraine, abolishing licenses, and introducing a 2% turnover tax, zero credit, etc. Thus, the state chose the second option of development. Surely, the decision is risky but the economic results will be seen at the end of April. Only then, the appropriate conclusions can be made. At the same time, Mr. Hetmantsev emphasized that there would be changes in the existing tax system.

Regarding post-war taxation, Mr. Hetmantsev stressed that it should fit into the Marshall Plan. Namely, it should consider the restoration of infrastructure & housing, the reinforcement of military capabilities (which is now a priority, and most of the tax revenues will go to the military-industrial complex accordingly), and the post-war economic restructuring. Reform of the judiciary and other unpopular reforms that did not take place in Ukraine will be resumed after the war. And, in fact, the tax system of the future is not about tax exemptions, but about fair redistribution, where entire industries will not be able to take advantage of reduced taxation.

Besides, Mr. Hetmantsev stressed the need for the Ukrainian economy to integrate with the EU market. After all, we hope that in the near future Ukraine will receive the status of an EU candidate country.

Danylo Hetmantsev also called on business representatives to pay taxes. Thus, the state emphasized the importance of paying taxes in advance at the start of the war. Besides, the state provided all necessary clarifications regarding the non-submission or late submission of declarations or non-payment of taxes. And, surely, if the company is on the territory of active hostilities, no sanction will be imposed on it. However, if the company is located in a “peaceful” area, its decision not to file a declaration for 2021 citing the war will be considered immoral. And the authorities will not perceive it as acceptable. Therefore, Mr. Hetmantsev called for a very conscious approach to these issues. Business needs to help the country by paying taxes.

The adopted laws on the seizure of property belonging to the russian federation and draft law № 7232 on increased taxation of companies with economic ties with rf were discussed. The Chairperson stressed that there is a reason to worry if a company has affiliated companies in russia. The authorities, on behalf of Ukraine, also appealed to European countries to impose sanctions on companies that still work with the russian federation. In Ukraine, companies have to declare their connections with russia (details in draft law №7232). Accordingly, companies have 1.5 years to withdraw from russia and complete all legal processes on exodus. There will not be a tax increase for the company that starts the severance of its economic ties with rf (income tax, environmental tax, rental property tax). If the company does not declare that it works with Russia, but if this fact becomes known after 3 years, the company will have to pay extra taxes for this period. Currently, the declaration on ties with russia is to be made voluntarily by the companies. The draft law was adopted in the first reading. Parliamentarians are ready to listen to business, so there is an opportunity to submit amendments to the draft law. It was agreed that the EBA will promptly collect the comments from our member companies and send them to the VRU Committee in the coming days.

Another important issue that arose was the restoration of VAT refunds. Mr. Hetmantsev noted that the Cabinet of Ministers is currently working on the issue so that at least companies of strategic importance can have VAT partially refunded. However, those who do not pay taxes, as well as those who do not submit any declarations on the cooperation with russia, and continue to do business with it, will not get refunds. Meanwhile, the registration of tax invoices will not be resumed until the end of the war – there is an official tax clarification on that. The issue of critical imports was also discussed. Danylo Hetmantsev stressed once again that critical imports refer to things that cannot be produced in Ukraine. If the production is possible then it does not fall under the category of “critical imports”. Therefore, the company needs to prove that its products are critical.

Regarding the compensation for destroyed property, the Chairperson said that the development of such a mechanism is underway.

The issue of RSO was also raised. Indeed, businesses are exempted from fines for not using the RSO during the martial law and six months later. However, no one has lifted the obligation to install them. The country will continue its course on cashless, so those who do not work with cards will be fined after the situation in Ukraine stabilizes.

We also discussed such issues as RES, state support for producers, and so on.

At the end of the meeting, Mr. Hetmantsev stressed that the next week or two will be decisive in the context of martial law. Nevertheless, everyone is hoping for peace to prevail as soon as possible!

We truly thank Danylo Hetmantsev for the meeting, and his willingness to talk with business, and consider the EBA proposals. Therefore, we look forward to further cooperation!