Land Tax during the War – Clarification of the State Tax Service

In order to support taxpayers and reduce the tax burden during the war, the parliament passed the Law of Ukraine of March 15, 2022 No. 2120-IX “On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine Concerning the Effect of Norms for the Period of Martial Law”, which introduced the following amendments to the Tax Code of Ukraine concerning payment for land (subparagraph 69.14 of paragraph 69 of subsection 10 of Chapter XX of the Tax Code of Ukraine):

– exemption for the payers: no land fee (land tax and rent for land plots of state and communal property) is accrued and paid for land plots (land shares) located in the territories where hostilities are being conducted (were conducted), or in the territories temporarily occupied by the armed forces of the Russian Federation and which are owned or used, including on lease, by individuals or legal entities, as well as for land plots (land shares) determined by the regional military administrations as littered with explosive objects and/or on which fortifications are located;

– term of the benefit: temporarily, for the period from March 1, 2022 to December 31 of the year following the year in which the martial law, state of emergency was terminated or abolished;

– territories to which it is applied: the list of territories where hostilities are being conducted (were conducted) or temporarily occupied by the armed forces of the Russian Federation is determined by the Cabinet of Ministers of Ukraine.

As of today, the government has not adopted a resolution that would determine the list of territories in which hostilities are being conducted (were conducted) or temporarily occupied by the armed forces of the Russian Federation.

At the same time, other documents were adopted, which in some way regulate such territories. Lawyers of the “Prime” Law Firm analyzed them and came to the following conclusions:

1. Regarding the Order of the Cabinet of Ministers of Ukraine “On Approval of the List of Administrative and Territorial Units on the Territory of Which Assistance Is Provided to Insured Persons under the “YePidtrymka” Program” of March 6, 2022 No. 204-р.

This Order is not a document that, in accordance with the Tax Code of Ukraine, determines the list of territories in which hostilities are being (were) conducted or temporarily occupied, as it is, firstly, aimed at determining the range of persons entitled to receive money assistance; secondly, it has not been updated since the date of its adoption. In view of the above, this document cannot be used to establish the right to a tax benefit.

2. Regarding the Order of the Ministry of Regional Development “On Approval of the List of Territorial Communities Located in the Area of ??Military (Combat) Operations or Which Are in Temporary Occupation, Surrounded (Blocked) as of May 3, 2022” dated April 25, 2022 No. 75, which is constantly updated given the situation on the battlefield.

This Order was adopted pursuant to the Resolution of the Cabinet of Ministers of Ukraine of April 16, 2022 No. 457 “On Support for Certain Categories of the Population Affected by the Military Aggression of the Russian Federation against Ukraine”, and it aims to determine the range of persons entitled to benefits as internally displaced persons.

We believe that this Order cannot be used for tax exemption purposes, taking into account both the purpose of its adoption and the body that approved it (Ministry of Regional Development, not the Cabinet of Ministers, as provided by the Tax Code of Ukraine).

However, due to the frequent questions of taxpayers about this document, the lawyers of the “Prime” Law Firm will apply to the tax administration body for individual tax advice on the regulation which establishes a list of territories where hostilities are being (were) conducted or temporarily occupied. In case of receiving individual tax advice, it will be published.

In addition to the above, it is important to properly reflect the right to tax benefits in tax reporting. The State Tax Service clarifies the issue of declaring land fees as follows:

1) given that the deadline for filing a land tax return for 2022 fell on February 21, 2022, land tax payers should, if possible, submit specifying tax declarations for the relevant plots within the defined territories after the official publication of such list;

2)  in the specifying tax declarations, it is necessary, starting from March 2022, to change and indicate the tax liabilities declared for payment in previously submitted tax returns in the amount of “0”, except for tax liabilities for January and February 2022. This also applies to the single tax payers of the fourth group, who filed the relevant tax returns on land fees in February 2022;

3)  to ensure the possibility of further identification of the grounds for reduction of tax liabilities, in the tax return it is necessary to indicate the number of the Law of Ukraine, namely 2120, as the code of a benefit in the column “Code of a benefit”.

Examples of filling out specifying tax declarations on land tax and rent for 2022 in connection with the adoption of the Verkhovna Rada of Ukraine Law No. 2120-IX were also provided, which are accessible at the link: https://tax.gov.ua/zakonodavstvo/podatki-ta-zbori/zagalnoderjavni-podatki/plata-za-zemlyu–fizichni-oso/formi-zvitnosti/.

The full text of the explanation is available at: https://ck.tax.gov.ua/media-ark/news-ark/581695.html.