Important Changes in Tax and Other Legislation in Connection with the Imposition of Martial Law

In view of the martial law regime introduced by the Decree of the President of Ukraine of February 24, 2022 No. 64/2022 “On the Imposition of Martial Law in Ukraine”, the Verkhovna Rada of Ukraine adopted important amendments to the Tax Code of Ukraine and other legislative acts, necessary for the support of citizens and business in connection with the military aggression of the Russian Federation against Ukraine.

1) It is not necessary to pay personal income tax on charitable assistance provided in favor of:

– participants in hostilities – servicemen (reservists, conscripts) and employees of the Armed Forces of Ukraine, National Guard of Ukraine, Security Service of Ukraine, Foreign Intelligence Service of Ukraine, State Border Guard Service of Ukraine, privates, officers, servicemen, employees of the Ministry of Internal Affairs of Ukraine, Department of State Protection of Ukraine, State Service for Special Communications and Information Protection of Ukraine, other military formations, volunteer formations of territorial communities, police officers and employees of the National Police of Ukraine;

– employees of enterprises, institutions, organizations, civil defense forces who take part in and are directly involved in repelling and deterring armed aggression of the Russian Federation and stay (stayed) directly in the areas of hostilities, or for the benefit of their families;

– natural persons who have suffered from military aggression, namely persons who reside (resided) in the settlements where hostilities are taking place (and have taken place) and/or who have been forced to leave their place of residence in connection with hostilities.

This exemption applies to charitable assistance provided during the martial law regime.

2) Citizens are released from liability to the lender for delay in fulfilling obligations under the consumer loan agreement.

Penalty (fine, surcharge) and other payments, the payment of which is stipulated by the agreement for overdue obligations, in the period from February 24, 2022 to the end of the thirty-days period after the date of termination or abolition of martial law, are subject to write-off.

An increase in the interest rate for the use of credit is prohibited, except in cases of application of the variable interest rate in accordance with Art. 1056-1 of the Civil Code of Ukraine.

3) The norms that gave the mortgagee the right to evict its residents from mortgage housing, acquire ownership of the mortgage or sell it have been suspended.

These changes shall be effective during martial law and within thirty days after the date of its termination or abolition.

4) For the period of martial law, the transfer of fuel for the needs of the Armed Forces of Ukraine and territorial defense units, as well as humanitarian aid, shall not be subject to excise tax and VAT.

Operations on import and supply of gasoline, diesel fuel, liquefied gas, and oil to the territory of Ukraine will be subject to VAT at the rate of 7%. At the same time, the rates of excise tax on motor gasoline, diesel fuel and liquefied gas have been set at 0 euros per 1000 liters.

The list of operations on exemption from VAT and customs duties on import and supply to the territory of Ukraine of helmets, bulletproof vests, helmets, medicines and other defense goods has been expanded.

5) For the period of martial law, non-profit organizations have the right to transfer property, provide services, use their income (profits) to provide assistance to combatants, health care facilities or transfer funds to special accounts opened by the National Bank of Ukraine to raise funds regardless goals (objectives, tasks) and activities defined by the constituent documents of the non-profit organization. This ensures that such organizations do not lose their non-profit status.

6) Sanctions for violations of the law on registrars of settlement operations (RSO) will not be applied until the end of martial law, except for sanctions for violations in the sale of excisable products.

7) For the duration of martial law, periods specified in the Tax Code of Ukraine and other legislation, the control over the observance of which is entrusted to the controlling bodies, shall be suspended.

8) Tax audits shall not be started, and the initiated audits shall be stopped. At the same time, the moratorium on conducting actual inspections of business entities has been lifted, which may have a negative impact on the activities of business entities during martial law.

These changes to the tax and other legislation came into force on March 17, 2022 after the publication of the Law “On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine on the Application of Norms for the Period of Martial Law” No. 2120-IX of March 15, 2022.