Review of Tax Payment Procedure for the Period of Martial Law

Regarding the payment of taxes and fees for the period of martial law:

1) Law “On Protection of the Interests of Subjects Who Must Submit Reporting and Other Documents during Martial Law or State of War” of March 03, 2022 No. 2115-IX (https://zakon.rada.gov.ua/laws/show/2115-20)

The Law provides for the possibility of individuals, individual entrepreneurs, legal entities to submit accounting, financial, bookkeeping, settlement, audit reports and any other documents required to be submitted in accordance with applicable law in a documentary and (or) electronic form, within three months after the cessation or abolition of martial law or state of war for the entire period of non-reporting or obligation to submit documents.

2) Law “On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine Concerning Peculiarities of Taxation and Reporting during Martial Law” of March 3, 2022 No. 2118-IX (https://zakon.rada.gov.ua/laws/show/2118-20#Text)

According to the Law, for the period prior to the termination or abolition of martial law, if the taxpayer does not have the opportunity to timely fulfill their tax duty, in particular, the one regarding compliance with deadlines for taxes and fees and reporting, taxpayers shall be exempt from liability under the TCU with the mandatory performance of such duties within three months after the cessation or abolition of martial law in Ukraine.

For taxpayers and controlling bodies, the time limits set by tax and other legislation, the control over the observance of which is entrusted to the controlling bodies, are suspended.

In other words, the Law does not exempt from paying taxes and fees provided by the TCU (including personal income tax, military duty, single tax), but only provides for the possibility of deferring their payment due to martial law.

In the future, it is possible to expand the benefits by exempting from paying certain taxes. In particular, on March 7, 2021, the President of Ukraine V. Zelenskyi announced exemption from land tax and rent for state and communal land in all territories where hostilities are taking place (“SICH “AVK” LLC). “All this is established for the period of martial law and at least a year after its end.” However, this statement must be fixed in legislative acts.

There were no such announcements regarding the payment of tax on real estate other than land (“Solution Invest” LLC), although during the introduction of quarantine by the Cabinet of Ministers in connection with the spread of COVID-19 in March 2020, taxpayers were exempted from paying tax on real estate (for one calendar month).

Regarding the payment of single social contributions (SSCs):

1. Zelenskyi announced the exemption from payment of SSCs forindividual entrepreneurs of the first and second groups. Enterprises and individual entrepreneursof the third group are exempt from paying SSPs only for the employees who have been drafted into the Armed Forces and other protective formations, including the Territorial Defense.

Deferral of payment of taxes and fees, provided by Law No. 2118-IX of March 03, 2022, does not apply to SSCs, the procedure for which is provided by another Law, “On the Collection and Accounting of Single Social Contribution for Obligatory State Social Insurance”. However, the Law “On the Collection and Accounting of Single Social Contribution for Obligatory State Social Insurance” exempts from penalties for late payment (late transfer) of the single social contribution for the duration of quarantine, which was extended by the Cabinet of Ministers until May 31, 2022.

Options for exemption from taxes and SSСs:

If an employee was accrued a certain amount of salary for the month, the SSС, personal income tax and military duty must be accrued and paid (as of February 2022).

The alternatives are:

1) Leave without pay. If an employee is on unpaid leave for a full calendar month, payroll taxes are not paid and SSСs are not accrued because there is no single contribution base.

Art. 84 of the Labor Code of Ukraine stipulates the maximum duration of unpaid leave – no more than 15 calendar days, but during the quarantine period (until May 31, 2022), the term of such leave will not be included into the total statutory duration as established by Art. 84 of the Labor Code of Ukraine.

2) There is also an option of the registration of downtime, but this will only partially reduce the payment to 2/3 of the salary in accordance with Part 3 of Art. 113 of the Labor Code of Ukraine.