Temporary tax, currency, and labor provisions introduced 

This article provides a summary of key tax, currency control, and labor regulations introduced in Ukraine in March 2022 in response to the ongoing conflict with Russia. These regulations typically apply from announcement and are expected to remain in effect while martial law is in force in Ukraine.

• No penalties should apply for failure to pay taxes and duties or file tax returns and reports, where circumstances mean taxpayers are prevented from compliance. Taxpayers must bring their affairs up to date, e.g., pay the taxes and file the returns, within three months after martial law is lifted.
• Until martial law is lifted, no new tax audits should be initiated and ongoing tax audits will be suspended. However, exceptions apply to desktop (i.e., virtual) audits to confirm VAT refunds and audits aimed at verification of cash handling procedures and compliance with labor legislation, which will continue during martial law.
• As from 1 April 2022 and while martial law is in force, corporate income taxpayers with annual turnover not exceeding UAH 10 billion (approximately USD 340 million) may elect to be subject temporarily to the 2% unified tax in lieu of corporate income tax. The unified tax will be calculated based on annual income without regard to expenses or other deductions. Companies that register for the unified tax also are relieved of the requirement to accrue VAT on their supplies. As such, the unified tax effectively substitutes for both corporate income tax and VAT.
  • To register for the unified tax regime, taxpayers must submit a request to the tax authorities prior to the first month of applying the new regime (e.g., a request must be submitted in March 2022 to pay the unified tax as from 1 April 2022);
  • Tax reporting must be conducted on a monthly basis;
  • After martial law is lifted, taxpayers must return to the general corporate income tax and VAT regimes as from the month following the one in which martial law is lifted; and
  • Some important limitations apply in that the following types of taxpayers are not eligible for the unified tax regime: insurance companies, banks, other financial institutions, permanent establishments of nonresidents, and mining companies.
• VAT administration is simplified, with taxpayers being allowed to claim input VAT without receiving VAT invoices (a mandatory requirement under normal rules). However, records will be required retrospectively, as within six months after martial law is lifted. Taxpayers must ensure the respective VAT invoices are registered in the unified register of VAT invoices.
• No VAT will be due on assets or goods lost as a result of military action.
• The transfer of goods and services to be used for the benefit of the military defense of Ukraine will not be subject to VAT. Similarly, the supply of fuel will not be subject to excise tax.
• Charitable contributions received for the benefit of individuals who have suffered as a result of the conflict and members of Ukraine’s armed forces will not be subject to personal income tax.
• The personal income tax allowance (i.e., the deduction against the taxable base) for charitable contributions has been increased from 4% to 16% for the 2022 tax year.
• The National Bank has imposed restrictions on cash withdrawals, purchases of foreign currency, and cross-border payments from bank accounts registered in the name of residents of Russia or Belarus, as well as bank accounts ultimately owned by residents of Russia or Belarus.
• Labor regulations have been made more flexible for employers while martial law is in force. Employers have been granted the right to suspend labor relations and the need to provide two-months’ notice of changes to essential working conditions has been waived. The ability to transfer an employee without the employee’s consent has been introduced.

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