Verkhovna Rada of Ukraine adopted the law aimed to provide additional social and economic guarantees amid the spread of coronavirus disease (COVID-2019)
Tax & Legal Alert
2 April 2020
At its extraordinary meeting held on 30 March 2020, the Verkhovna Rada of Ukraine amended certain legislative acts of Ukraine aimed to provide additional social and economic guarantees due to the spread of coronavirus disease (COVID-2019) (Law of Ukraine No.540-ІХ).
Key amendments introduced by Law of Ukraine No.540-ІХ are as follows:
Changes to contractual relations:
- A possibility of exempting a lessee from lease payments for the period from the date of quarantine introduction and until its termination because of the inability to use rented property due to the circumstances for which a lessee is not responsible.
- It is prohibited to increase interest rates on loan agreements during the implementation of measures to prevent epidemics and pandemics in Ukraine, in particular COVID-19.
- No liability for late payment under all consumer loans for the period from 1 March 2020 to 30 April 2020 (including those executed before the Law on Consumer Lending has entered into force).
Exemption from taxation of goods and products used to combat COVID-19
Introduction of changes to personal income tax, VAT, corporate income tax and export duty to encourage businesses and individuals to participate in measures aimed to combat the spread of COVID-19:
- Based on the results of 2020, it is allowed to include in PIT tax credit the full amount of funds or expenses (previously, the rate was 4% of the total taxable income for the reporting year) for medicines, means of individual protection, equipment, personal care products, food, etc., and/or goods as per the list determined by the Cabinet of Ministers of Ukraine (CMU), provided that such funds and/or goods are donated to public associations, charitable organizations, designated state agencies, and health institutions.
- From 17 March 2020 until the last month of the quarantine, exemption from payment of VAT on imports and supply of goods used to combat COVID-19 (including medicines, medical devices and/or medical equipment) in the customs territory of Ukraine as per the list determined by CMU. In the event of such transactions, provisions of the Tax Code of Ukraine on accrual of “contingent liabilities” for VAT and the proportional tax credit rule shall not apply.
- From 17 March 2020 until a month when the quarantine period for COVID-19 ends, transactions for providing such charitable assistance by public associations and/or charitable organizations are not included in the total amount for mandatory registration by a VAT payer.
- Introduction of changes to corporate income tax that allow the taxpayers not to adjust the financial result for the full amount of funds and expenses in 2020 (previously, the rate was 4% of taxable profit for the previous reporting year) for medicines, equipment, personal care products, equipment, personal hygiene products, food, etc. and/or goods as per the list determined by CMU provided that such funds and/or goods are donated to non-governmental associations, charitable organizations, designated state agencies and/or sate-owned or communal health institutions.
- Sate-owned and/or communal health institutions, and/or a person authorized to make procurements in the health sector, in their turn, can now reduce the financial result figure before tax in the 2020 declaration in the event of receiving funds or the above goods, and increase it in the event of using such funds/goods.
- Exemption from import duties of goods used to combat COVID-19 (including medicines, medical devices, and medical equipment) as per the list determined by CMU. Customs clearance of such goods is conducted on a first-priority basis. Fees for the completion of customs formalities outside the location of customs authorities or outside working hours will not be charged.
The lifting of moratorium on physical audits of excise duty payers and expansion of the list of cases subject to penalties
The legislator lifted the moratorium on conducting physical audits of excise duty payers and expanded the list of cases subject to penalties for the violation of applicable laws by the payers with regard to:
- Record keeping, licensing, production, storage and transportation of fuel, ethyl alcohol, alcoholic beverages and tobacco products
- Intended use of fuel and ethyl alcohol by taxpayers
- Equipping excise warehouses with flow meters and/or level gauges
- Carrying out of functions defined by the legislation in the field of production and circulation of ethyl alcohol, alcoholic beverages, tobacco products and fuel upon the receipt of information from the state authorities or at the request of a consumer
Extended timelines for desk audits
Desk audit of tax returns and adjusting calculation for March–May 2020 (excluding tax returns and adjusting VAT calculation) can be performed within 60 calendar days (previously, it was 30 days), which is the last day of filing deadline or, if they are filed late, within 60 calendar days following the date of the actual submission of such documents.
Suspending the running of limitation periods for administrative appeals
Limitation periods outlined in Article 56 of TCU for the administrative appeal procedure (except appeals involving the legality of declaring VAT declared for reimbursement from the budget and/or a negative value for VAT) shall be suspended as follows:
- Appeals that were received/will be received by 31 May 2020
- Appeals that were not considered as of 18 March 2020
The running of limitation periods shall continue from 1 June 2020 taking into account time elapsed before the suspension
Single tax: increased limit of income for single tax payers and revised single tax rate
The limits for applying the simplified tax system were increased as follows: from UAH 300 thousand to UAH 1 million for the first group; from UAH 1.5 million to UAH 5 million for the second group; from UAH 5 million to UAH 7 million for the third group.
Local governments were given the right to decide on the single tax rate reduction in 2020.
Changes to excise tax administration
Temporary introduction of a number of new conditions for the production and record keeping of ethyl alcohol and disinfectants until 30 April 2020.
Introduction of a zero excise duty per liter of 100% alcohol until 31 May 2020. The entry into force of provisions of the Tax Code of Ukraine on reconciling indicators of turnover and fuel residue and indicators of turnover of ethyl alcohol was postponed for one quarter. Accordingly, the reconciliation system will be launched in the test mode in July 2020, and it will be fully launched in October 2020.
It was established that the maturity dates of tax receipts issued by manufacturers or importers of jet fuel within a period from 1 March 2020 to 31 May 2020 shall be extended to 15 August 2020. In the event of confirming the intended use of such fuel, the receipt may be paid without paying excise tax specified in such receipts and without applying penalties.
In the absence of confirmation of the intended use of fuel by 15 August 2020, the manufacturer/importer shall be charged a penalty of 50% of the amount of excise tax determined based on the volume of such fuel and the excise tax rate using a factor of 10.
Exemption from land charge and real property tax other than land property
Land charges and real property tax will not be charged for March 2020 (previously, this applied for March-April 2020).
If taxpayers file the adjusting tax returns to reduce the above taxes for April 2020 for reasons other than error correction, such taxpayers may, until 30 April 2020, file another tax return reflecting the respective changes due to the recent legislative amendments. Penalties envisaged by Articles 50 and 120 of the TCU will not be charged for filing of such tax returns.
Payers of the above taxes who file tax returns must pay their taxes for April in full until 30 June 2020. However, in case of violation of an overall time limit set for payment of tax liabilities, no penalties or fines will be charged for this period.
Single social tax (SST)
Penalties for late payment (remittance of single social tax), incomplete payments of single social tax with the issue of amounts of payments on which single social tax is accrued (advance payments), and late submission of the single social tax reports shall not apply in May 2020 (previously, the exemption was extended only to March and April 2020). No penalties will be charged during this period and the penalties accrued should be written off. A ban on the SST-related audits is extended until 31 May 2020 (previously, it was until 18 May 2020).
For the time being, for a period up to and including 31 May 2020, the term of consideration of appeals lodged by single social taxpayers that were/will be received by 31 May 2020 and/or that were not considered as of 18 March 2020, shall be suspended. The deadline for lodging appeals that should be lodged within a period from 18 March to 31 May 2020 was extended.
Disclosure of financial statements. Exemption from liability for violation of time limits
- Exemption from liability for violation of timeframes for disclosing financial statements and consolidated financial statements for 2019 along with the auditor’s opinion
- Entities are exempt from liability if they disclose such statements during the quarantine period or within 90 calendar days from the date of its termination
Extension of most procedural timeframes for the quarantine period
Extension of the limitation period (both the general and special period) for the quarantine period.
In terms of the administrative, civil, and economic procedures, most timeframes were extended for the quarantine period, namely:
- Timeframes for bringing a matter before the court, submitting a recall motion and responding to a recall motion, objections, explanations by a third party in a claim or recall, and filing a counterclaim
- Timeframes for leaving a claim without motion and returning a claim
- Timeframes for lodging appeals and cassation appeals as well as consideration of appeals and cassation appeals
- Timeframes for exercising by parties of their rights to change the subject matter or cause of action and to increase or decrease the volume of their claims
- Timeframes for submitting evidence and pre-trial discovery of evidence
- Timeframes for filing an application for cancelling a court order, appealing, appealing against a decision by an arbitral tribunal
- Timeframes for the periods for which proceedings are suspended
- Timeframes for filing an application for judicial review of newly discovered or exceptional circumstances, etc.)
- A period specified in a court decision may not be less than the quarantine period
At the same time, the procedural timeframes stipulated by the Code of Administrative Offenses of Ukraine were not extended.
Remote work and a flexible schedule during the quarantine
- The concept of flexible working hours and remote (from home) work was introduced. Possibility of their introduction via an order (instruction) by the owner for a period the threat of epidemic spread was provided.
- It was established that remote (from home) work provides for full payment, unless an employee and employer have agreed otherwise in writing.
- It was clarified that downtime for the quarantine period shall be subject to payment as per the general rules for downtime (at least two-thirds of a tariff rate for a category set for an employee salary).
- Timeframes for referring to court to settle labour disputes were extended for the quarantine period.
- Joint stock companies are allowed not to hold the annual general shareholders’ meetings until 30 April 2020. Such meetings shall be held not later than three months after the end of quarantine period.
- In the nearest time, the National Commission on Securities and Stock Market (NCSSM) will approve an act regulating the procedure for holding the general shareholders’ meetings remotely.
- If the powers of joint stock companies’ supervisory boards expire in 2020, they will be extended until the date of the general shareholders’ meeting.
- Similar exemptions for holding of general shareholders’ meetings are envisaged for companies that are issuers of securities, corporate funds and credit unions.
Support to small and medium-sized enterprises (SMEs)
- The restriction on the provision of state support to SMEs that are already receiving the same type of state support, the deadline for which has not expired, was lifted.
- For employees of SMEs, the possibility of providing partial unemployment assistance at an employer’s request was provided for the quarantine period.
- Introduction of a price ceiling for anti-epidemic products and socially important goods. The lists of such goods should be made by CMU.
- For exceeding the price ceiling for such goods by 1.2 times, a penalty ranging from UAH 3,400 to UAH 4,250 shall be imposed (for citizens) and from UAH 4,250 to UAH 5,100 (for officials) as well as a penalty of 100 percent of unreasonably received proceeds for a business entity.