Updated rules for tax collection under martial law in Ukraine
On 27 May 2022 the updated rules of tax collection under martial law in Ukraine took effect (Law No. 2260-IX dated 12 May 2022).
Below is a short summary of the key changes that are supposed to remain in effect during at least the next three months (as the martial law was recently extended until 23 August 2022).
Fulfillment of Taxpayers’ Obligations
Under the rule that has been effective from the start of martial law a taxpayer which does not have a possibility to fulfill his obligation could be exempted from relevant penalties (the “Liability Exemption”) provided that he does fulfill his obligation within six months following the lifting of martial law. This rule has applied to such taxpayers’ obligations as timely filing tax reports, registration of tax invoices and payment of taxes (the “Obligation(s)”).
Now the conditions for the Liability Exemption shall be detailed and shall depend on the circumstances of each taxpayer.
- If a taxpayer does not have a possibility to fulfill his Obligation during the whole period of martial law, he is exempt from the penalties on the condition that he fulfills the Obligation within six months following the lifting of martial law.
- If a taxpayer initially did not have a possibility to fulfill his Obligation, but his possibility is restored during the period of martial law, he is exempt from the penalties on the condition that he fulfills the Obligation within 60 days following the end of calendar month in which his possibility was restored. This applies to the Obligations which became due on any date between 24 February 2022 and the date on which the taxpayer’s possibility to fulfill the Obligation was restored (but in any case within the period of martial law).
- If a taxpayer had a possibility to fulfill his Obligation (but failed to do so for any reason), he is exempt from penalties on condition that he fulfills the Obligation until the date specified in the legislation, namely: (1) until 15 July 2022, the obligation to register a tax invoice; (2) until 20 July 2022, the obligation to file a tax report; (3) until 31 July 2022, the obligation to pay the tax. This applies to the Obligations which became due on any date between 24 February and 27 May 2022.
- If a taxpayer switched to 2% Flat Tax System (“2% FTS”), he is exempt from penalties with respect to his Obligations which became due on any date from 24 February 2022 until his switch to the 2% FTS, on condition that he fulfills the Obligation within 60 days following his return to his “pre-war” tax regime.
The Ministry of Finance of Ukraine shall determine the procedure and evidence required to confirm whether a taxpayer did or did not have a possibility to fulfill his Obligation.
The moratorium on tax audits imposed since the start of martial law shall now be somewhat lighten. The tax authorities shall be able to assign or renew the following types of tax inspections:
- chamber audits;
- actual audits;
- unscheduled documentary audits under the following grounds:
- upon request of a taxpayer
- in relation to reorganization, liquidation or deregistration of a taxpayer;
- based on VAT refund applications or VAT returns indicating negative VAT amount exceeding UAH 100,000;
- based on information about violation of currency control regulations regarding currency repatriation requirements in the export and import operations.
Tax audits on any other grounds cannot be started or renewed.
If the “permitted” tax audit identifies relevant tax or currency control violations, the taxpayer shall be penalized with no regard to the penalty moratoria and exemptions introduced during martial law or COVID-19 quarantine. This, however, does not prevent the taxpayer from claiming general liability exemptions provided in the Tax Code (including, for instance, a force majeure exemption).
Some terms which have been frozen since the start of martial law shall now be renewed, including the following:
- terms for filing tax reports, registration of tax invoices;
- terms for payment of taxes;
- terms for the “permitted” tax audit (see above) and for the producing paperwork related to such audits (tax audit reports, taxpayers’ objections, tax assessment notices, etc.)
Other terms (including statutes of limitation in the tax laws) remain frozen as from the start of martial law.