Since 24 February 2022, the Parliament has adopted special tax and customs incentives to ensure support for taxpayers during the period of martial law.
One of the key incentives relates to extending a simplified gross-based taxation — otherwise available to small and medium businesses, including private entrepreneurs — to virtually any business willing to opt for such special single tax regime. For the martial law period, however, such regime is materially extended in terms of the scope of eligible taxpayers and reduced tax rate. A number of customs-related reliefs are also offered, including for special single tax payers.
Special single tax regime
From 1 April 2022 and for the duration of martial law, eligible taxpayers may opt for the special 2% single tax levied on the taxpayer’s revenues.
Starting from 17 April 2022, the special single tax regime is available to taxpayers irrespective of their revenue threshold. The earlier introduced UAH 10 billion (USD 340 million) revenue threshold is no longer applicable in light of the changes enacted by Law No. 2173-IX dated 15 April 2022.
The 2% single tax will allow opting out of CIT, VAT, land tax and PIT (in the context of the activities of PEs). Legal entities that were payers of regular 18% CIT and 20% VAT would thus be able to switch to the single tax regime and, instead, pay 2% tax on their revenues. Taxpayers opting for or switching to the special single tax regime will be relieved of the obligation to accrue, pay and report VAT on their supplies/imports into Ukraine.
In order to benefit from the regime, the taxpayers should make the relevant filing with the tax authorities. The new regime will be applicable from 1 April 2022 for the taxpayers that applied before this date. Otherwise, the taxpayers will be able to switch to the regime from the next working day upon submitting their application.
Unlike the regular single tax regime, the special 2% regime does not impose any restrictions on the number of employees who may work for the taxpayer. The regime, however, is not available to non-residents and their branches in Ukraine, financial institutions, insurance companies and taxpayers involved in certain activities, e.g., gambling, transactions with excise goods (except for vehicles and certain other operations).
Customs-related reliefs
The Parliament has also introduced import duty and import VAT reliefs that apply to certain importers/ types of goods.
Based on Law No. 2142-IX:
- No import duty would apply to goods imported by legal entities for free circulation (except for certain excise goods, e.g., ethyl alcohol and other alcohol distillates, alcoholic beverages, tobacco products).
- There would be no VAT, import duty and excise tax on cars and other vehicles imported by individuals.
- No VAT would apply to goods imported by payers of 2% single tax. The taxpayers who opted for a special single tax regime may enjoy simplified customs declaration formalities: such taxpayers may declare goods based on the preliminary customs declaration with the customs formalities completion being largely committed not to exceed one hour.
The import reliefs do not apply to goods originating in or being exported from Russia or any other state deemed an ‘aggressor state.’
The relaxations also include: (i) freeze of current and suspension of new documentary customs audits, and (ii) suspension of specific customs-related deadlines.
