Tax developments in connection with martial law

The Verkhovna Rada of Ukraine approved the Laws ¹ providing for the following temporary measures until martial law is lifted or cancelled:

• taxpayers are relieved from responsibility if they are unable to perform their tax obligations on a timely basis provided that they perform such obligations within 3 months of expiry or cancellation of martial law (if the taxpayer fails to perform his or her tax obligation within the above timeframe as a result of consequences of immediate engagement in military operations, he or she is relieved from responsibility if payment is made within 1 month of termination of such consequences). The Law includes a non-exhaustive list of examples: failure to meet the deadlineі for reporting or payment of tax liabilities, registration of VAT invoices
• no tax audits may be started and those already in progress shall be suspended
• the deadlines defined in tax and other law shall be suspended
• the functioning of the VAT refund register shall be effectively suspended
• no sanctions shall be imposed for non-compliance with the legislation requiring the use of registers of payment transactions
• donation of cash or goods to Ukrainian Armed Forces or territorial defence forces on a free-of-charge basis shall not be treated as sales for tax purposes
• regarding the corporate profit tax: the adjustment under clause 140.5.9 of the Tax Code of Ukraine (“TCU”) regarding the donation of cash and goods to charitable organisations on a free-of-charge basis shall not apply to certain cash and goods (bulletproof vests, foods and others) provided to certain organisations (Ukrainian Armed Forces, Ministry of Interior and others) for defence purposes
• the compensation for fuel used in transportation of Ukrainian Armed Forces and territorial defence forces shall not be added to the taxable base for PIT purposes
• if an excise tax invoice cannot be registered, transportation of fuel and alcohol is permitted f provided that all data that is required to be included in the excise tax invoice is available in the shipping document
• licences for transactions with excisable goods (sales, manufacturing, storage, etc.) shall be extended.

At the same time:

• the laws are be effective from 7 March 2022 and do not apply retrospectively
• relief shall be granted only to taxpayers unable to perform their tax obligations. However, no guidance is provided on evidence of inability to perform one's tax obligations.

In addition, the Cabinet of Ministers of Ukraine simplified the rules applicable to imports of humanitarian aid and certain other goods ².

Certification of force majeure conditions

The Trade and Industry Chamber of Ukraine (“TIC”) certified the occurrence of force majeure conditions in Ukraine from the beginning of Russian Federation’s aggression against Ukraine and imposition of martial law in Ukraine, namely, from 24 February 2022 and  until their official termination ³.

In addition, on 14 March 2022, TIC approved a simplified procedure for certifying force majeure conditions. No individual certification of the occurrence of force majeure conditions is currently required, and the general official letter of TIC dated 28 February 2022 represents such certification for anyone requiring such evidence. 

Clarifications by tax authorities

Since the beginning of martial law, tax authorities have issued a number of clarifications on applying certain provisions of tax law starting from 24 February 2022. Some conclusions from these clarifications have been confirmed by the Laws adopted in relation to:

• non-applicability of clause 140.5.9 of TCU (donation to not-for-profit organisations)
• extension of licences on transactions with excisable goods
• suspension and rescheduling of tax audits
• suspension of certain deadlines required by TCU.

Conclusions available from the clarifications and not currently formalised in legislation include, in particular, the following:

• fines and penalties automatically recorded in the taxpayer’s information card for non-compliance resulting from the taxpayer’s inability to perform the tax obligation as a result of Russian Federation’s military aggression against Ukraine will be written off
• VAT payers may report VAT liabilities and input VAT without registered VAT invoices (and adjustment calculation thereto) based on primary documents after 24 February and until the end of martial law. After martial law is lifted, taxpayers are required to register all VAT invoices/adjustment calculations unregistered due to martial law. Following this, VAT returns should be updated where appropriate. A new VAT invoice form will be available for registration after the martial law. The Unified Register of VAT invoices is currently unavailable
• similar rules (applicable to VAT payers regarding VAT invoices) also apply to excise tax payers regarding excise tax invoices. At the same time, excise tax payers will be required to issue excise tax invoices for fuel provided to Ukrainian Armed Forces / territorial defence forces and lost as a result of force majeure conditions
• free-of-charge seizure of fuel (either voluntary or mandated) does not represent sales of fuel for excise tax purposes
• if the excise tax warehouse has been demolished, is located in the area of military activities or uncontrolled area, the taxpayer is not required to maintain records, but will be required to perform a physical inventory count and resume maintaining records after martial law is lifted
• taxes may be paid regardless of whether the taxpayer is able to submit its reports, either in cash or by bank transfer
• the unified tax may be paid by card using online banking.

Please note that the clarifications issued do not represent comprehensive tax advice and therefore are primarily for information purposes.