What has changed?

Traditionally, the individual income declaration season starts right after the New Year holidays and continues until early May, and 2020 is not an exception. Currently, we are completing and filing our declarations for 2019 reporting year.

Usually, income declarations have to be filed by 1 May. However, COVID-19 has prompted some changes both to the declaration procedure and to the filing deadlines. Even if you are a responsible taxpayer and intend to prepare all the documentation on time, you simply will not be allowed to the tax office because it is closed for servicing citizens.

To keep you updated with the latest developments, we are launching a series of articles on quarantine and its impact as well as other tax issues that are high on the agenda for taxpayers.

Individuals are required to file an annual declaration when they receive income:

• From entrepreneurial activities (under the general taxation system)
• From independent professional activities
• From an individual who is not a tax agent
• From foreign sources
• From investing activities
• From leasing out of property (if lessee is an individual who is not an entity)
• In the form of property inherited or received as a gift from individuals who are not first or second degree relatives

The main cases when citizens have the right to file an annual tax return include the refund of excess taxes paid (for example, in case of failure to notarize the purchase and sale certificate) and application for tax discount.

Under ordinary circumstances, the annual declaration should be filed with the tax authorities by 1 May of the year following the reporting year (i.e. the declaration for 2019 should be filed by 1 May 2020) with the respective tax liability paid by 1 August.

If the only reason for filing an annual return is to claim tax discount, the filing deadline is 31 December 2020.

In addition, the deadline for filing return can be extended if the documents that are required to claim tax credit cannot be received from the tax authorities of other states by 1 May. Please note that in this case the respective application for extending the filing deadline should be submitted to the tax authorities by 1 May.

Due to the implemented quarantine measures, the deadline for filing 2019 declarations has been extended until 1 July 2020. The amount of tax stated in declaration should be paid by 1 October 2020.

Personal income tax rates remain unchanged – the base rate is 18% (however, certain types of income are taxed at 9%, 5% or 0%). In addition, military levy of 1.5% is charged on all income that is subject to personal income tax (PIT).

Special attention should be paid to the form of declaration. Effective from 1 January 2020, income declarations are submitted using the new form approved by Order of the Ministry of Finance No.177 dated 25.04.2019.

Usually, income declarations are submitted in one of the ways:

• Personally (an original declaration signed by taxpayer)
• By mail (sent by registered mail with the list of enclosures and return receipt requested)
• Via taxpayer’s personal account (if a person has an electronic digital signature)
• Through an authorized person (who submits declaration personally provided that such a person has notarized power of attorney)

Due to the limitation of visits to the Taxpayer Service Centers amid quarantine restrictions, electronic services, such as the taxpayer’s personal account are becoming more relevant than ever. Besides, it is impossible to obtain any original documents from the tax authorities before the quarantine is over. Alternatively, income declarations can be sent by registered mail as all post offices operate as usual. However, this option is not advisable just as well as visiting of other crowded places amid the spread of the virus.

The only option left is the use of the Taxpayer’s personal account that allows submitting declarations on asset and income remotely, receiving information about taxes paid for the period and checking the receipt of tax amounts paid based on the declaration results without leaving home.

It should be noted that this service is available only to persons who have electronic digital signature. If you did not get your electronic digital signature before the quarantine was imposed, you can use services of one of the accredited online key certification centers.

The State Tax Service has launched a series of video tutorials explaining how to use the electronic services. It is very likely that the number of declarations submitted electronically will increase this year.

Paying taxes based on the declaration results

In October 2019, the details of accounts for payment of taxes and levies were changed once again. New accounts were opened to comply with the IBAN requirements.
This has brought some hope that the Ukrainian PIT can be paid from abroad using foreign currency account (previously, this was impossible to do, thus creating some difficulties for people who do not live in Ukraine permanently and do not have an account in UAH).

Unfortunately, these hopes still remain unfulfilled. Despite publishing the details of foreign currency accounts on the official website of the Treasury of Ukraine, it will not be possible to transfer from abroad funds (for example, in euro) to pay the Ukrainian PIT or military levy because the Treasury does not have foreign currency accounts for local budgets to which such taxes are paid.

Therefore, responsible citizens still have no alternative: taxes are paid to the budget only in the national currency and only from accounts opened with the Ukrainian banks.

When making payments, it is important to indicate in the purpose of payment the
correct budget classification code, the taxpayer identification number and the reporting period. This will allow your payments to be correctly identified and received by the tax authorities.

In addition, it should be noted that in the case when the individual's tax liability is paid by a third party (an individual or legal entity), such payment may be treated as an additional benefit in terms of the Tax Code of Ukraine (which is also taxable).

A person making such payments should have the relevant authority evidenced by duly executed power of attorney.

We hope that this article will help you to consider the basic rules of the declaration process more attentively and that the quarantine will not prevent you from fulfilling your tax obligations properly.

This article is co-authored with Victoria Chornovol, Tax & Legal Partner at Deloitte Ukraine