In pursuit of the already adopted amendments to the Tax Code of Ukraine for the period of martial law (hereinafter - Law No. 2120-IX), the Verkhovna Rada of Ukraine adopted another bill (Bill No. 7190), which clarified a number of provisions of Law No. 2120-IX, as well as additionally.

Now Draft Law No. 7190 is being prepared for signature by the President with further publication. We offer an analysis of its main innovations based on the published text of the adopted bill.

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Changes in the newly created special taxation regime of the third group of the simplified taxation system.

Recall that Law No. 2120-IX allowed taxpayers with a turnover of up to UAH 10 billion with an unlimited number of employees to switch to the third group of the simplified taxation system. Payers under the new “simplified” rules must pay a 2% income tax instead of income tax and VAT.

The list of transactions for which the single tax payer of the third group will be exempted from VAT tax liability has been expanded. Law No. 2120-IX provided that the payers of the single tax of the third group would be exempted from the tax liability for VAT on transactions for the supply of goods and services, the place of supply of which is located in the customs territory of Ukraine.

Draft Law No. 7190 extended this exemption also to operations involving the importation of goods into the customs territory of Ukraine, except for goods imported from the aggressor country.

Changed tax period. Instead of a quarterly reporting period, Draft Law No. 7190 requires filing a declaration monthly. The payment of obligations remains monthly with the change of advance payments to the usual payment of tax obligations determined in the tax return.

The list of persons who cannot switch to a simplified taxation system on special conditions has been increased. Thus, the list of persons who cannot be payers of a single tax at a rate of 2% includes persons engaged in the import of passenger cars, bodies for them, trailers and semi-trailers, motorcycles, vehicles intended for the transport of ten or more persons, vehicles.

At the same time, the import of cars by ordinary individuals will be exempt from duties, excise and VAT, as stated in paragraphs 3. 1 and 3.

The transition to a simplified system is possible in the middle of the quarter. Law No. 2120-IX suggested submitting an application for the transition no later than the last day of the quarter, which meant its registration as a single tax payer from the first day of the next quarter. In fact, payers who did not have time to submit a corresponding application before March 31 would not be able to use the new legal taxation regime until July 2022.

At the same time, Draft Law No. 7190 provides that persons will be considered single tax payers from April 1, 2022, if an application is submitted before April 1, 2022, and from the next working day after such an application is submitted, if an application is submitted after April 1, 2022..

The procedure for exemption from tax liability for VAT has been clarified. Recall that Law No. 2120-IX on VAT only indicated the exemption from the obligation to calculate, pay and file tax returns for value added tax. At the same time, this wording raised a number of issues that are partially resolved by Draft Law No. 7190.

Registration by a payer of value added tax upon transition to a simplified taxation system will be considered suspended. This means that for the period of being on a simplified taxation system, the rights and obligations established by section V and subsection 2 of section XX of the Tax Code of Ukraine are suspended, without canceling the registration of a VAT payer.

Operations carried out while under the simplified taxation system will be considered exempt from VAT. So, after the use of goods and assets acquired with the formation of a tax credit, it will be necessary to accrue additional compensatory tax liabilities for VAT. At the same time, it will be necessary to accrue such obligations not immediately, but not later than the last day of the reporting period in which the registration as a VAT payer is restored, that is, after the abolition of martial law in Ukraine.

If everything looks logical with goods in this case, then the need to accrue compensation obligations for fixed assets, given the temporary use of the new single tax regime, may create additional difficulties for payers.

Thus, the base for additional accrual of compensatory obligations for non-current assets, in accordance with Draft Law No. 7190, is determined based on the book value prevailing as of the beginning of the reporting period, during which operations are carried out on a simplified taxation system.

At the same time, after the end of martial law and the return to the general taxation system, taxpayers will obviously be able to use paragraph six of clause 198. 5 article 198 of the Tax Code of Ukraine and reduce the amount of tax liabilities based on the calculation of the adjustment to the consolidated tax invoice.

That is, after the end of martial law, the taxpayer will need to accrue additional compensatory obligations on non-current assets and immediately reduce them by calculating the adjustment. In fact, if the book value has time to decrease during martial law, it will be necessary to pay VAT on the amount of such a decrease..

Clarified transitional provisions on income tax. Draft Law No. 7190 only introduced the obligation to file corporate income tax returns for those periods during the calendar year in which the payer was a payer of the appropriate order.

At the same time, the procedure for recognizing income in the transition period has not been agreed upon, which indicates the need to apply previously existing rules, in particular paragraph 2 of clause 292. 6 and subparagraph 6 of paragraph 292. 11 Article 292 of the Tax Code of Ukraine.

So, the income of a single tax payer will not need to include the amount of funds received as payment for goods (works, services) sold during the period of being on the common system, the cost of which was included in income when calculating income tax.

If the payment was received as an advance, which did not affect the calculation of income tax, then the date of receipt of income will be the date of shipment of goods (performance of work, provision of services). That is, the amount of the advance received earlier will need to be included in the income of the single tax payer and taxed at a rate of 2%.

The period during which a taxpayer may, without the application of sanctions, not fulfill a tax obligation, if he does not have such an opportunity, has been increased.

The Law of Ukraine dated March 3, 2022 No. 2118-IX established that if the taxpayer is unable to timely fulfill his tax obligation, taxpayers are exempted from liability with the obligatory fulfillment of such obligations for three months after the termination or cancellation of martial law in Ukraine.

Draft Law No. 7190 increased the period during which it will be necessary to fulfill the tax obligation from three to six months from the moment of termination or cancellation of martial law in Ukraine.

Mandatory payments for the import of goods and cars have been partially canceled.

Exemption of goods from import duties. From the moment Draft Law No. 7190 comes into force (but not earlier than April 1, 2022) and until the termination or cancellation of martial law on the territory of Ukraine, goods imported for free circulation, and cars, bodies for them, trailers will be exempt from taxation of import duties.

The corresponding duty exemption does not apply to ethyl alcohol and other alcoholic distillates, alcoholic beverages, beer, tobacco products, tobacco, industrial tobacco substitutes, liquids used in electronic cigarettes.

At the same time, if imports are carried out by payers of the first or third groups of the single tax (except for enterprises paying the third group at a rate of 3% + VAT), customs clearance of goods should last no more than one working hour.

Exemption from VAT taxation of imports of goods. Also, from April 1, 2022, for the period of martial law on the territory of Ukraine, operations on the import of goods by payers of the single tax of the first and third groups are exempt from VAT (except for individuals and legal entities of the third group at a rate of 3% + VAT).

Exemption of car imports from VAT and excise tax. For the same period, operations on the import by individuals of passenger cars, bodies for them, trailers and semi-trailers, motorcycles, vehicles intended for the transport of ten or more persons, vehicles for the transport of goods are exempted from VAT and excise tax for the same period..

Summing up, we note:.

individuals are exempt from duty, excise tax and VAT when importing cars;

individuals and legal entities are exempt from paying duties when importing goods (except for goods specified in paragraph 3. 1 exception);

payers of the single tax of the first and third groups (except for enterprises - payers of the third group at a rate of 3% + VAT) are exempt from duties and VAT when importing goods;

it is important that all mentioned exemptions do not apply if goods or cars are imported from the aggressor state or from the occupied territory of Ukraine.

Temporary exemption from tax on immovable property other than land.

For the 2021 and 2022 tax (reporting) years, real estate tax will not be accrued and paid for residential property located in the territories where hostilities are (were) conducted, or in temporarily occupied territories, and for residential property.

The list of territories in which hostilities are (were) conducted or which are temporarily occupied by Russian armed formations will be determined by the Cabinet of Ministers of Ukraine.

With regard to non-residential real estate objects located in the territories where hostilities were fought, or in temporarily occupied territories, temporarily, for the period from March 1, 2022 to December 31 of the year in which martial law was terminated or abolished, a similar tax will also not be paid.

At the same time, regulatory authorities will independently calculate tax liabilities for individuals for January-February 2022. Legal entities will need to file a clarifying tax return on real estate other than land.

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Thus, Draft Law No. 7190 agreed on a number of conflicts with regard to value added tax. This will allow businesses to use the new taxation regime more effectively to improve economic performance.. Additional benefits were also provided to citizens and businesses, which, of course, will contribute to an increase in the volume of imports of necessary goods to meet the needs of the population in the context of a partial shutdown of production within the country..

Read more articles by Andrey Reun at the link.