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COVID-19 in Ukraine: options to postpone tax payment and other fiscal measures

On 18 March 2020, the President of Ukraine signed a new law that introduces social tax, land, and property tax incentives during  the quarantine period to include tax exemptions, postponement of tax audits and possibility to postpone tax payments. By possibility of postponement we mean that statutory deadlines for payment are not changed, but payment can be delayed with no penalty and interest.

All these measures target the following:

 

Medium and large businesses

  • 2-month exemption from land tax, which is expected to be a benefit for heavy industry, mining, power production;
  • 2-month exemption from real estate tax on non-residential property is supposed to help office centers, hotels, shopping malls, supermarkets;
  • Option to postpone social tax payment on employees’ salaries due for March and April;
  • Theoretically, businesses have option to delay payment of payroll taxes (income tax and military levy) till 31 May, but it is not clear how this will apply in practice, since the taxes are employees’ cost and are collected from the gross salary when the salary is paid. Furthermore Ukrainian banks may be unwilling to process wire transfers of salaries to employees’ bank accounts if they see no evidence of income tax withholding;
  • Option to postpone profit tax payment for 1Q 2020 (effectively only up to 10 extra days for payment of tax in May without penalty);
  • There are no VAT benefits, VAT continue to operate in a usual way (including tax audits of VAT refunds and penalties, if any);
  • No exemptions for excise tax and royalties for mineral extraction.

 

Private individuals

  • Extension (not optional) for filing of an annual income tax return and payment of income tax and military levy for year 2019. The new filing deadline is 1 July and the tax shall be paid by 1 October 2020;
  • Primarily the recipients of passive income in 2019 are expected to benefit (dividends from foreign companies, gains from sale of shares and corporate rights, rental income from real estate, etc.).

 

Private entrepreneurs

  • 2-month exemption from social tax of such entrepreneur payabale for him/herself;
  • No exemption from business income tax or flat tax, but postponement till May 31 is optional;
  • Option to postpone payment of social tax due for March and April on salaries paid by the entrepreneur in respect of his/her employees;
  • Option to postpone payment of income tax and military levy on employees’ income is rather questionable;
  • 2-month exemption from land tax and real estate tax on non-residential property;
  • 3-month postponement of mandatory cash register rules.

 

Tax audits (all taxpayers)

  • Ongoing tax audits will be suspended and planned tax audits will be rescheduled to a later date;
  • Statute of limitations for tax audits will be extended accordingly for 2.5 months.

 

To get more information or discuss business and legal implications for your company caused by novel coronavirus outbreak please get in touch with Asters COVID-19 task force at covid19-response@asterslaw.com

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