Certain Wartime Tax Benefits Are to Be Abolished Starting from July 1

On May 29, the Verkhovna Rada adopted Draft Law No. 8401 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding the Peculiarities of Taxation During Martial Law” in the first reading.

According to the explanatory note to Draft Law, its development is conditioned by the need to implement clause 15 of the Memorandum on Economic and Financial Policy dated December 8, 2022, according to which Ukraine undertook to restore the pre-war state of tax policy as soon as possible.

As part of this process, it was established that certain legal norms shall be in effect until the termination or cancellation of the state of war or emergency on the territory of Ukraine, but no later than July 1, 2023, the following measures shall be canceled:

• possibility for individual entrepreneurs and legal entities to be payers of the single tax of the III group with the application of the uniform income tax rate of 2%. This means an automatic return to the previous tax system or group they were registered in before the transition to the 2% rate;

• possibility for individual entrepreneurs – single tax payers of the I and II groups not to pay the single tax;

• suspension of documentary checks. Inspections are resumed under the condition of safe access to territories, premises and property used for economic activity and/or are subject to taxation, as well as relevant documents and information;

• stopping the passage of certain periods determined by the tax legislation and other legislation, the control over compliance of which is entrusted to the controlling bodies;

– non-application of fines for violation of tax legislation, violation of the correctness of accrual, calculation and payment of a single contribution to mandatory state social insurance; violation of the procedure for using settlement transaction registers/software settlement transaction registers.

Therefore, Ukraine will return to the pre-war standards of taxation, inspections and fines. However, Draft Law contains one important innovation: in the case of payment by the taxpayer within 30 calendar days from the day following the date of receipt of the tax notice-decision, the amount of the tax liability calculated based on the results of documentary checks that were resumed or started from July 1, 2023 and completed before the termination or cancellation of the state of war or emergency on the territory of Ukraine, penal (financial) sanctions (fines) calculated on the amount of such tax liability shall be canceled, and interest will not be charged.

Legislators predict that the abolition of the single income tax rate of 2% will allow to attract about UAH 8 billion to the budgets in 2023.

Draft Law No. 8401