Verkhovna Rada of Ukraine adopted a law aimed to prevent the emergence and spread of coronavirus disease (COVID-19) as well as a number of tax liberalization provisions due to the COVID-19 virus pandemic
Tax & Legal Alert
18 March 2020
On 17 March 2020, Verkhovna Rada of Ukraine amended certain legislative acts of Ukraine aimed to prevent the emergence and spread of coronavirus disease (COVID-19) and liberalize tax legislation due to the COVID-19 virus pandemic (draft laws No.3219 and No.3220 dated 16 March 2020). On 18 March 2020, the President of Ukraine Volodymyr Zelenskyi signed the respective laws (Laws of Ukraine No.530-IX and No.533-IX dated 17 March 2020). The official text of law No.533-IX has already been published.
Key amendments introduced by draft law No.533-IX are as follows:
The list of force majeure circumstances
- The list of force majeure circumstances has been extended: from now on, the force majeure circumstances shall mean extraordinary and inevitable circumstances that objectively make it impossible to fulfill the obligations envisaged by the terms of an agreement (contract, etc.) and duties in accordance with the legislative acts and other laws and regulations, in particular the imposition of quarantine by the Cabinet of Ministers of Ukraine.
Temporary measures in the field of labor relations for the period of quarantine
- Work from home for the period of quarantine (restrictive measures)
- Institutions, agencies and companies are allowed to change their work schedules, in particular with regard to the reception and servicing of individuals and legal entities Information about such changes should be made known to the public through websites and other communication means.
- Changes in the rules for calculation of unpaid leave period: in the event of quarantine imposition by the Cabinet of Ministers of Ukraine, the period of unpaid leave shall not be included in the total period of such leave (currently, no more than 15 calendar days per year).
Liability for violation of quarantine rules
- Introduction of the administrative responsibility for the violation of quarantine rules in the form of penalties in the amount of UAH 17,000–UAH 34,000 for citizens, and UAH 34,000–UAH 170,000 – for officials.
- Increased penalties and criminal liability for the violation of rules for the prevention and control of infectious diseases and mass non-communicable diseases (poisoning), if such actions have caused or could knowingly cause a spread of these diseases (Article 325 of the Criminal Code of Ukraine). Such actions are punishable by a fine in the amount from UAH 17,000 to UAH 51,000, or arrest for up to six months, or restriction of freedom for up to three years, or imprisonment for up to three years.
No administrative liability for the violation of legislation on the legal status of foreign nationals and stateless persons
- Foreigners and stateless persons who were unable to travel outside Ukraine or apply to the territorial offices/divisions of the State Migration Service of Ukraine for an extension of their stay in Ukraine and/or for a change of their temporary/permanent residence permit shall not be subject to the administrative liability for the violation of legislation on the legal status of foreign nationals and stateless persons if such violations occurred during the period of or as a result of quarantine introduction.
State supervision (oversight) and administrative services
- It is prohibited for the state supervisory (oversight) authorities to carry out scheduled activities on the state supervision (oversight) of economic activities for the period of quarantine.
- It is envisaged that the running of the period for applying for the administrative and other services and timelines for the provision of such services determined by the law will be suspended from the date of the quarantine introduction. The running of these periods will be continued from the quarantine termination date, taking into account the amount of time that has passed before the quarantine was terminated.
Restrictions placed on the Law of Ukraine on Public Procurement
- It was established that the Law of Ukraine on Public Procurement shall not apply to cases where the procurement items are goods, works or services necessary for the implementation of measures aimed to prevent the emergence, spread, localization and elimination of the coronavirus outbreaks, epidemics and pandemics. The list of such goods, works or services and the respective procurement procedure is approved by the Cabinet of Ministers of Ukraine. At the same time, it was agreed that the spending units (recipients) of budget funds could envisage in their procurement contracts a hundred percent advance payment for such goods, works or services. Based on the results of such procurement in the electronic procurement system, a customer shall make public a report on the procurement contract executed without the use of an electronic procurement system, the procurement contract and any appendices thereto, and a report on the performance of a contract. In case of non-compliance with the requirements for the publication of this report, the responsible persons will be held liable.
Tax and customs novelties
- The transactions involving the supplies of medicines, medical devices and/or medical equipment in the customs territory of Ukraine that are necessary for the implementation of measures aimed to prevent the emergence, spread, localization and elimination of the coronavirus outbreaks, epidemics and pandemics, the list of which is identified by the Cabinet of Ministers of Ukraine (CMU), are temporarily exempt from VAT.
- Additionally, it is envisaged to temporarily exempt such goods from import duties and provide for the priority customs clearance of such goods.
Prevention of foreclosure on mortgaged property
- Transitional provisions of law No.530-IX impose a duty on the Cabinet of Ministers of Ukraine to ensure the adoption of regulations and submission of draft laws to the Verkhovna Rada of Ukraine, in particular, on suspension of duty to fulfill the principal obligation secured by a mortgage and to prevent foreclosure on mortgaged property for the period of quarantine (restrictive measures).
Draft law 3220 provides for amendments to the Tax Code and other regulations. Key amendments include:
Cancellation of fines and penalties for certain tax legislation violations
- No penalties will be applied for the violation of tax legislation committed for the period from 1 March to 31 May 2020. This provision does not apply to violations related to:
- Requirements to long-term life insurance agreements/non-state pension insurance agreements
- Alienation of property under tax lien without the consent of the regulatory authority
- Rules for accounting, production and control of fuel or ethyl alcohol in excise goods storages, which are applied on a common basis
- Accrual, declaration and payment of VAT, excise tax and rent. The law does not explicitly mention the abolition of penalties for late registration of tax invoices and adjustment calculations. We should wait for the clarification by the State Tax Service.
- No penalties will be charged to taxpayers during the period from 1 March to 31 May 2020; moreover, the penalties that were accrued but not paid for this period shall be written off.
- Recalculation of payments for land tax payers is performed by the State Tax Service.
The additional restrictions on the application of penalties with regard to single social tax are set out below.
Abolition of real property tax for non-residential properties
- For the period from 1 March to 30 April 2020, non-residential properties owned by individuals or legal entities will not be subject to real property tax other than land property.
- At the same time, real property tax payers (except for individuals) have the right to file an adjusting tax return that must reflect changes to the tax liability for the respective months.* Recalculation of real property tax other than land property for individuals is performed by the State Tax Service.
*This provision of the draft law contains a technical error. We expect that after the respective technical amendments, the nature of this provision will be as stated in this alert.
Introduction of a ban on certain tax audits
- A ban on documentary and physical audits, except for audits related to the confirmation of the right to VAT refund, is introduced for the period from 18 March to 31 May 2020.
- The information about rescheduling of audits, which, according to the audit schedule should start in the period from 18 March to 31 May 2020, shall be included in the updated audit schedule to be published on the website of the State Tax Service by 30 March 2020.
- Audits that have been started before 18 March and have not been completed will be temporarily suspended until 31 May 2020. This suspension interrupts the audit period and does not require any additional decisions by the State Tax Service.
- Suspension of the period of limitations (1095 days and 2555 days for the review of transfer pricing) for the period up to 31 May 2020, which can be covered by tax audit.
Postponement of filing of declaration on assets and income for 2019 and payment of applicable individual income tax
- The deadline for filing of declarations on assets and income and payment of individual income tax is extended until 1 July 2020 and 1 October 2020, respectively.
Temporary cancellation of land tax
- No land tax will be charged or payed for the period from 1 March to 30 April 2020.
- At the same time, the payers of land tax (except for the individuals) who have filed a tax return have the right to file an adjusting tax return that should reflect changes to the land tax liability for the respective months. Recalculation of land tax payments for individuals is performed by the State Tax Service.
Exemption of certain categories of payers from the payment of single social tax (SST) and the cancellation of fines for certain violations regarding SST
- Sole proprietors, self employed persons and members of farming enterprises, if they do not belong to persons who are subject to insurance on other grounds, are exempt from the accrual and payment of SST in respect of amounts payable for themselves for the period from 1 to 31 March 2020 and from 1 April to 30 April 2020. However, the specified periods will be included in the pensionable service. Such persons may decide to pay a single social tax for the periods from 1 to 31 March 2020 and from 1 to 30 April 2020 in the amounts and in the manner specified by this Law. In this case, information about the amounts paid shall be reflected in the statement of SST accrued for the reporting period as specified for such persons by this Law.
- No penalties will be charged for the following violations committed in the period from 1 to 31 March 2020 and from 1 to 30 April 2020:
- Late payment (transfer) of SST amounts
- Underpayment or late payment of SST simultaneously with the payment of amounts on which SST is charged (advance payments)
- Late submission of reports
- No penalties will be charged to SST payers during the period from 1 March to 31 May 2020; moreover, the penalties that were accrued but not paid for this period, shall be written off.
- A ban on the SST-related documentary audits is introduced for the period from 18 March to 18 May 2020.
- The SST-related audits that have been started before 18 March 2020 and have not been completed, will be temporarily suspended until 18 May 2020.
- The effective date of the provisions on mandatory use of cash registers by certain groups of taxpayers, as well as the imposition of new sanctions for law violations when using cash registers, have been postponed.
- Staying in the specialized health care facilities or self-isolation under medical supervision in connection with the measures aimed to prevent the spread of COVID-19 are included in the list of cases where temporary disability assistance is provided, starting from the sixth day of disability, in the amount of 50% of the average salary (income) regardless of the length of pensionable service.
- In the event of delayed fulfillment by a consumer of its obligations under the consumer loan agreement during the period from 1 March to 30 April 2020, a consumer shall be released from liability to a lender for such a delay.
- It is prohibited to increase interest rates on consumer loans (unless a variable interest rate is applied) during the period from 1 March to 31 May 2020.