Current information for business during the pandemic

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The duration of quarantine in Ukraine crossed the mark in three weeks. It would seem that restrictions are not so long, but the whole country felt a powerful blow inflicted by COVID-19 to the national economy. Let’s consider in this article the catastrophic figures of lost workplaces, decrease in profit by 50 -75%, precomatous state of small business and the taken measures of the government which should save a situation.

According to the results of the study of the European Business Association, 18% of small enterprises will not survive quarantine consequences and will be closed forever. In other words, every 5th small business will not be able to overcome quarantine. Beauty salons, hotels, travel companies, event agencies have been closed for three weeks, and according to the estimates of restaurateurs 30% of catering establishments will not open their doors to new visitors. Owners and managers predict that the resumption of cases will take at least six months, and a decrease in income during 2020 on average will be 50%. At the same time, 28% of companies surveyed expect a drop in revenues by more than 60% during the year.

All this means that many Ukrainians lost their jobs or were sent on unpaid leave. As reported by Hennadii Chyzhykov, the President of the Chamber of Commerce and Industry of Ukraine, according to official statistics, in Ukraine about 3,5 million people work in the informal sector, of which about 1 million are involved in the “quarantine” industries, and officially they employ about 2,9 million people. Having made these data, we receive figure of nearly 4 million of Ukrainians unemployed through quarantine.

Specialists of the Union of Ukrainian Entrepreneurs conducted their own study of the state of business in different regions of the country, the results of which were reflected in the following data:

  • 51% of the surveyed companies are able to hold out in quarantine for another month maximum;
  • every fourth company will withstand two or three months of work in such conditions;
  • 6% have already closed their business (mostly small and medium-sized enterprises).

Only 3% of respondents indicated that their business can work for a long time, but for this it is necessary to implement a number of conditions, in particular, to introduce rental holidays and revise their own business models.

If we talk about a diagnosis that can be put to different categories of national business after three weeks of isolation, the picture looks like this.

As expected, microenterprises are quite bad things — the owners note the loss of profits at the level of 90 -100%, most of them will not be able to resume their activities. In small and medium-sized businesses, the head hurts due to loss of income at the level of 25 -50%, and this is with a staff reduction by 10 -25%. Big business feels better, its losses are kept at around 10 -25%, however, in case of continuing quarantine, this figure will have to be supported by a reduction in the number of employees by about a quarter until the end of restrictive measures.

The banks also felt the quarantine blow, but their troubles came, as they say, from where they were not expected — borrowers were strongly reassured by the law prohibiting creditors to charge penalties and fines on consumer loans to natural persons (Law No. 3220, adopted by the Verkhovna Rada on March 17, 2020). As a consequence, current payments on loans instantly fell by 50 -60%. The situation has improved slightly after the contact centers of banks began to call customers and communicate with them on the need for restructuring or credit vacation. Payments grew by about 15-20% after such a “maneuver” . However, banks and financial companies still have not received stable loan repayment at its pre-outbreak level.

It remains only to guess whether the banks have their own financial resources to withstand the fall of payments on loans and at the same time continue to paying off deposits in a timely manner and in full. However, sector experts say that, as banks’ capitals have increased greatly after the 2014-2016 crisis, the banking system of Ukraine is able to withstand such a shock. This is also confirmed by the results of stress testing of the NBU for 2019. But do not forget that no one in the country has an idea of how the coronavirus epidemic will evolve.

What has already been done?

In addition to a number of tax exemptions and benefits adopted by the government to save business and support the population, which we wrote about in another article, on April 13 at an extraordinary meeting, the government adopted a whole draft law “On Amendments to the Law of Ukraine” On the State Budget of Ukraine for 2020“ dated April 11, 2020, No. 3279-d”. Its key goal is to create the COVID-19 Coronavirus Response Fund and its consequences for the quarantine period and within 30 days from the date of its completion.

By means of the Fund the following will be sponsored:

  • purchase of goods, works and services, including the purchase of medical services under the program of state guarantees of medical care of the population;
  • additional payments to the salaries of medical and other employees directly involved in measures to eliminate COVID-19;
  • additional payments to certain categories of workers providing livelihoods of the population for the period of struggle with the spread of the disease;
  • provision of financial assistance to citizens, including elderly people, due to the negative consequences of the spread of COVID-19;
  • one-time cash assistance to members of families of medical and other health care workers who died due to COVID-19;
  • provision of a transfer to the Pension Fund of Ukraine;
  • financial assistance of the Social Insurance Fund and the Social Insurance Fund of Ukraine in case of unemployment.

What’s next?

The economic forecast for 2020 announced by Prime Minister Shmyhal, already twice worsened by the politician himself, is still considered by banks to be too optimistic. Bank of America on April 2 said that Ukraine’s GDP decline is estimated to be 5,6%. Analysts of Ukrainian banks are also confident that we will feel the decline in GDP already in the first quarter. And although all forecasts differ from each other, they come to one point under the ‘pessimistic’ scenario — minus 10% in annual terms. According to the Ukraine COVID-19 Business Impact Survey conducted by the  American Chamber of Commerce, 65% of Ukrainian companies will not be able to fulfill their annual business plans. Anyway, the minimal losses we had hoped for back in mid-March can be forgotten now.

We have now come to the point from which the authorities should treat the measures taken with increased caution and attention. Thus, exemption from land and real estate taxes is an advantage for entrepreneurs, but it can hit local budgets, depriving them of an important source of income amid problems associated with the coronavirus epidemic.

Attempts to make hryvnia borrowings can result in high inflation, that is, formally people will receive money, but in fact only become impoverished, because they will be able to buy much less.

If quarantine is extended until the end of May, most small businesses will have to self-liquidate. Catering establishments will feel it especially acutely.

However, this scenario is marked as “pessimistic”. The working scenario at the moment is a gradual exit from the lockdown in May. This was stated by the head of the government. He also noted that the plan for the country’s return to “normal” includes the completion of the 2019-2020 school year, the resumption of public transport, but under the new rules, free visits to recreation areas, etc. However, the face mask regime will continue.

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All-Ukrainian quarantine transferred to remote work of employees of the majority of Ukrainian entities to slow the rate of spread of the disease and save more lives. However, the mass transition to digital space is fraught with hidden threats. Quarantine untied hands to swindlers, especially those of them who works on the global Internet. In this article we will consider the most popular schemes of fraud and effective methods of counteracting them.

Dr. Evil and pseudo-contractors attack

Since the beginning of quarantine around the world hacker activity was gaining momentum every day. Today we have a significant surge in such activity which consists in mailing of malicious software and creation of fake sites and services. The purpose of the attackers is to steal personal data of victims who “get on the hook”, learn passwords from their bank accounts or company accounts, their accounts, and in the future steal money or information. And even all at once.

Panic and lack of information pushes people to independently search for at least some news about the pandemic and its consequences for the economic well-being of the country, and the newsletter itself throws the “necessary” data into their hands. Hackers and cyberthieves are probably the most flexible category of intruders as they are surprisingly quick to adapt to circumstances and get the most out of it. So now in mailings we see letters from medical institutions, private doctors, laboratories and so on.

For example, the specialists of the Californian company Proofpoint, which offers solutions for the data leakage protection system, recorded strange messages that their customers began to receive. In these letters, a certain Doctor denounced the existence of a vaccine against COVID-19, which the Chinese and British authorities are trying to hide. Conspiracy Theory fans and simply interested users found themselves on an online document on a site that was no different from the popular data resource Docusign. But the site was a fake, and its main function was to collect credentials and passwords. Representatives of Proofpoint reported that such letters are sent in batches of 200 thousand at a time.

But the most dangerous type of mailing for companies are letters from pseudo-contractors. Attackers learned to impersonate current partners, suppliers, customers, creditors, etc., and began sending letters about the following content: “We have changed our bank details in connection with quarantine. Use the new account to pay for services/goods/credits: **** **** **** ****”. It’s not difficult to guess whom the deceived users’ money will actually go to.

What to do: tighten cybersecurity. The best pill of excessive curiosity for your employees will be a webinar or publication on a corporate resource of information about potential risks that carry letters from unverified senders. If your company has a specialist in cybersecurity (and you have not had time to dismiss him on the wave of optimization of costs), set him the task to conduct a crash test of the data transmission channel and digital armor of the enterprise as a whole. The main goal is to identify weaknesses and “bottlenecks” in defense and eliminate them as soon as possible.

Raiding is included in the high season

It is difficult to imagine more favorable circumstances for intruders than general panic and vanity. Rewrite the company or property on a fake court decision or on the basis of an unscrupulous notary’s decision for raiders now is not difficult, since evil not only does not slumber, but does not sit in quarantine, unlike most employees. The Ministry of Justice confirms that the number of addresses today is really great. But to make any predictions as to how much the flow of such complaints will grow during the crisis (the traditional time for redistribution of property), now no one takes. Therefore, businesses need to take good care of their own security and minimize risks on their own.

What to do: in order to be ready for the “mask-show”, it is worthwhile to check all the equipment in time that can record physical manipulations carried out in your office: make sure that security services are paid for, and CCTV cameras are working properly. Make sure that among your key employees there are no offended and insulted, especially among those who have access to important information. Why? It’s simple — the “leak” of data in order to harm the company often comes from employees in conflict with their employer.

Having dealt with cameras and employees, dig deeper — see the list of shareholders and partners, which had previously arisen conflicts and disagreements in opinions; update the monitoring system changes in the registers, so as not to miss the illegal change of land ownership, real estate or corporate rights. For this purpose, there are several online services and mobile applications, just set a query in the search box of your browser. All this is necessary in order to prevent a fictitious meeting of shareholders and physical seizure of assets.

If we talk about the support of the state in the issue of illegal seizure, we can note the Anti-Raiding Commission of the Ministry of Justice, which started its work on January 16, 2020. Its task is to consider raider actions and return property and business to legal owners within 24 hours. Also, for the protection of property, the Anti-Raiding Office continues to work actively. Applying to the hotline, you can get an answer on the stage of consideration of the complaint and advice on the procedure for its submission and consideration, receiving complaints about actions and decisions of state registrars, issuing documents on the outcome of the complaint consideration, etc.

Classics of the genre — fraud in accounting

The team of accountants is often mistaken for “statisticians” who do not have a real impact on cash flow. Limiting in their minds the function of an accountant only by counting taxes, ignoring the accounting function and not understanding the objective processes, the company’s managers personally destroy the protective mechanisms of combating fraud.

And while the owners are in blissful ignorance, accounting workers, having direct access to the current accounts, for mercenary reasons can increase the salary fund of employees at the expense of “dead souls”, overcharging bonuses and other mandatory payments, “pouring” money into their own pockets. Moreover, the situation, provoked by quarantine, ideally contributes to this — in case of perturbations with staff cuts, changes in wages and cuts in costs, there is a wide space for creative maneuvers.

What to do: attack your accountant with suspicion is not worth it, it will be sufficient to strengthen control over the implementation of any payments, especially purchases. Also it is necessary to pay attention to operations on write-off of property, plant and equipment. If you want to control funds, just limit or complicate the procedure for withdrawing and transferring money. For example, connect the current account to the client-bank, then a two-step confirmation system will be required to make payments. The accountant creates a payment and signs with his signature, and the manager checks and signs payments with his key.


Quarantine slowed down the production process and created many difficulties for Ukrainian business. But if you keep cool and think two steps ahead, you can see some good opportunities for development that have been given to us by slowing down the pace of global entrepreneurship. This is the best time to identify weaknesses in the system of protection of your assets and the company as a whole. Otherwise, these opportunities will be used by ill-wishers, and it will become even more difficult to resist them.

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Financial statements and consolidated financial statements for 2019, together with the auditor’s report, can be published during the quarantine period or within 90 calendar days following the day of completion of quarantine, but not later than December 31, 2020. This is provided by the Law adopted by the Verkhovna Rada “On Amendments to Certain Legislative Acts to Provide Additional Social and Economic Guarantees in Connection with Spread of Coronavirus Disease (COVID-2019)”.

If the quarantine is not extended after April 24, 2020, the term of publication of the reporting for 2019 together with the auditor’s report is not later than July 24, 2020.

The procedure for reporting companies belonging to the category of securities issuers is also changed due to reference to the date of the general meeting of shareholders.

Issuers must publish reports within 5 working days after the meeting according to paragraph 29 of Draft Law No. 3275. The general meeting of shareholders for 2019, issuing companies have to hold within a period not later than three months from the date of completion of the quarantine according to paragraph 30 of Draft Law No. 3275.

As for the specifics of audit of financial statements of public interest entities in the conditions of the COVID-19 pandemic, the Audit Public Oversight Board recently issued an information message, which stressed the importance of the following aspects:

  • assessment of risks associated with the COVID-19 pandemic and the introduction of quarantine and restrictive measures, as well as the need to review previously assessed risks;
  • determining the circumstances caused by the influence of the COVID-19 pandemic and the introduction of quarantine and restrictive measures as key audit matters, their notification to those charged with governance and disclosure in the relevant paragraph of the auditor’s report;
  • the auditor’s ability to obtain reasonable audit evidence in sufficient extent before submitting an auditor’s report, due to restrictions on movement, actual access to the location of entities, as well as limited opportunities for communication with the client’s personnel due to health status. Auditors should adapt their approach to auditing with maximum use of alternative procedures and modern technologies. If it is impossible to obtain proper evidence, the auditor should consider the modification of the opinion and, depending on the circumstances, express either a qualified opinion or a disclaimer of opinion;
  • special attention of the auditor to the significant judgments of management regarding accounting estimates, in particular, the effect of the COVID-19 pandemic and the introduction of quarantine and restrictive measures on estimation uncertainty and disclosure in the financial statements of information related to the relevant accounting estimates. For many business entities, the COVID-19 pandemic and the introduction of quarantine and restrictive measures can lead to direct and indirect financial impact on their activities. Direct influence can be manifested through impairment of non-current assets, a significant change in their fair value, changes in expected credit losses against financial assets, impairment of receivables, etc. Indirect may arise from the impact on buyers and suppliers, which can lead to increased costs or lower incomes, the need to recalculate collateral;
  • auditors assess the disclosure of information on the impact of the COVID-19 pandemic and the establishment of quarantine and restrictive measures on its activities, financial position and future economic indicators, whether they are appropriate in accordance with the applicable financial reporting conceptual framework, as well as consideration of the inclusion in the auditor’s report of the relevant explanatory paragraph. If, according to the auditor’s judgment, there are no proper disclosure in the reporting, it will be necessary to consider the modification of the opinion;
  • obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern assumption in the preparation of financial statements, taking into account the growing uncertainty associated with the change in the economic situation and pessimistic forecasts of the global and national economy. The auditor should carefully consider the effect of such assessment on the auditor’s report with the adequate going concern disclosures in the paragraph “Basis for Qualified Opinion” or in the paragraph “Material Uncertainty Related to Going Concern”;
  • review of other information that is not financial statements (management report, annual information of the issuer of securities, etc.) for the disclosure of the matter of the influence of the COVID-19 pandemic and the introduction of quarantine and restrictive measures on the activities of the business entity and assess whether is such disclosure consistent with the relevant disclosure in the financial statements.

From the practice of Kreston GCG, it should be noted that, given the restrictions on movement and access to the location of entities, we resort to the use of alternative procedures to obtain sufficient appropriate audit evidence. In particular, we practice remote photo and video recording of physical inventory of stocks and property, plant and equipment, the use of cloud solutions, as well as remote communication with the client’s staff through secure communication channels.

The extension of the season of carrying out and publication of financial statements and auditor’s report significantly simplifies the situation, which allows postponing some of the procedures related to the need for physical familiarization with primary documents or assets.

It should be noted that since the introduction of legislation on mandatory audit, and especially after the adoption by the Verkhovna Rada of the bill №1210 in January 2020, the audit community has expressed an opinion on the need to extend the terms of publication of reports and audit from June 1, 2020 at least for 2-3 months.

Unfortunately, the audit season for 2019/2020 was eventually extended due to more serious, independent of the financial market reasons.

As for the auditors’ assessment of the disclosures provided by business entities on the impact of the COVID-19 pandemic and the introduction of quarantine and restrictive measures on their activities, financial position and future economic indicators, much depends on the complex indicators of the entity results of 2019: liquidity indicators, credit load level, etc.

In view of the fact that for the reporting period of 2019, the alarming events of March-April 2020 refer to events after the reporting date, and have not yet been reflected in the reporting period, it is expected that most companies will be able to avoid modifications of audit opinion on matters directly related to the impact of the COVID-19 pandemic.

How significant and long the impact of the pandemic on the activities of public interest entities will be at the end of 2020 depends on how long the pandemic will last and how long macroeconomic indicators will fall in Ukraine and in the world.

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On April 2, 2020, Law No. 540-IX dated March 30, 2020 “On Amendments to Certain Legislative Acts to Provide Additional Social and Economic Guarantees in Connection with Spread of Coronavirus Disease (COVID-2019)” came into force. The document amends more than thirty legal acts. In particular, the Law abolishes VAT for the import of medical goods and exempts business from paying land tax and property tax, rent for land plots in state and communal ownership. This article provides an overview of tax changes that have affected business since the beginning of quarantine.

Unlike the enterprises of European countries, in Ukraine taxes in any case have to be paid — we are not going to have tax holidays. Instead, Ukrainian entrepreneurs will be temporarily exempted from fines and penalties. For individuals – entrepreneurs, annual limits will be increased and inspections canceled. This is not to say that these measures will be enough to save the business, but still it is better than nothing.

Let’s take a look at the key easing that the state offered to business:

  • Medical goods are exempt from VAT taxation for the period of quarantine;
  • Until April 30, the excise tax on import of disinfectants is canceled;
  • Fines and penalties for tax violations and late payment of USC and submission of reports from 1 March to 31 May are cancelled;
  • A moratorium on carrying out tax audits from March 18 to May 31 is established.

In addition, from March 17 to the last day of the month, which will be completed quarantine, business expects the abolition of value added tax and import duty on delivery to Ukraine of goods necessary to combat COVID-19.

Also, the law increases the annual limits for single tax payers:

  1. of the first group from UAH 300 thousand to UAH 1 million;
  2. of the second group from UAH 1,5 million to UAH 5 million;
  3. of the third group from UAH 5 million to UAH 7 million.

If the limit is exceeded, the entrepreneur will be forced to pay an additional single tax of 15% (legal entities of the third group of 30%) from the amount exceeding this limit.

As the limits increase, individuals – entrepreneurs will pay less taxes. For business entities, this is undoubtedly a big plus, since increasing limits will allow entrepreneurs to get more revenue per year (in other words, to sell more). Increasing the limits of the use of preferential taxation in the form of a single tax should become a stimulating factor for the development of entrepreneurial activity:

  • increase the number of entrepreneurs who will be able to switch to a simplified taxation system;
  • individuals – entrepreneurs, who partially or fully worked “in the shade”, will finally be able to switch to the “white” accounting.

About fines and violators

Law No. 533-IX exempted business from penalties for violation of tax legislation, committed during the period from March 1 to May 31, 2020. However, there are exceptions in the list of “forgiven” violations. So, entrepreneurs nevertheless should pay for:

  • violation of the requirements for long-term life insurance contracts or insurance contracts within non-state pension provision, including insurance of additional pension;
  • alienation of property, which is in a tax lien, without the consent of the supervisory authority;
  • violation of the rules of accounting, production and turnover of fuel or ethyl alcohol at excise warehouses, which are applied on a general basis;
  • violation of charging, declaration and payment of value added tax, excise tax, rent.

At the same time, from March 1 to May 31, 2020 sanctions for violations related to electronic administration of VAT and excise tax will not be applied:

  • for non-registration (late registration) of tax invoices/adjustment calculations to tax invoices in the Unified Register of tax invoices;
  • for non-registration (late registration) of excise invoices/adjustment calculations to excise invoices in the Unified Register of excise invoices.

What about the inspections?

The question that was of most interest to chief accountants of all enterprises of the country — what will happen to documentary and actual inspections started before quarantine? The answer is comforting — the inspections started before and not completed prior to March 18 have been suspended until May 31, 2020.

Consequently, the moratorium on documentary and actual inspections for the period from March 18, 2020 to May 31, 2020 is valid for all inspections, except for documentary unscheduled inspections in accordance with the requirements of the sub-clause 78.1.8 of clause 78.1 of Article 78 of the Tax Code of Ukraine. However, the introduction of a moratorium on inspections does not deprive taxpayers of the right to submit objections to the acts of audits completed before the introduction of the moratorium, and to appeal the tax notices-decisions taken on their results.

If planned inspections were to begin in the period from March 18 to May 31 in accordance with the schedule, but on the day of entry into force of the Law № 533 were not started, the timing of their implementation should be adjusted by transferring to the schedule for future periods, after the end of moratorium.

Charge, calculation and payment of USC: what’s new?

From 1–31 March and from 1–30 April 2020 the USC temporary exemption applies to:

  1. Individuals entrepreneurs, including those who have chosen a simplified taxation system;
  2. Persons engaged in independent professional activities (including scientific, artistic, educational or teaching, as well as medical, legal practice) or religious activities and receive income from this activity;
  3. Members of the farm, if they do not belong to persons who are subject to insurance on other grounds.

At the same time, the payers of the USC at their own discretion decide on the application of the provided exemption from the USC.

That is, the payer can decide on the charge, calculation and payment of the USC for the specified periods. In this case, the information on the paid amounts shall be disclosed in the USC reporting for the period.

If the taxpayer has already paid contributions for March and April 2020, before the entry into force of the Law No. 533, such amounts will be credited to the account of future payments, provided there are no arrears, penalties and penalties for this contribution.

As for the exemption from sanctions on the USC until April 30, 2020, the penalties do not threaten for the following violations:

  • late payment (late transfer) of the unified contribution;
  • incomplete payment or late payment of the amount of the unified contribution simultaneously with the issuance of payment amounts for which the unified contribution (advance payments) is charged;
  • untimely submission of reports.

During periods from 1–31 March and from 1–30 April 2020, the payers of the unified contribution are not charged a penalty, and the accrued penalty for these periods is subject to write-off.

RCO will wait: who would get an extension for the application deadline?

All “unified tax payers” of the II-IV groups received a deferment for the implementation of mandatory use of RCO and/or software RCO until April 1, 2021. Changes affected individuals – entrepreneurs – single tax payers of Group II – IV. Thus, the following will be postponed:

  • application of software RCO until August 1, 2020;
  • usage of RCO and/or software RCO for certain activities until January 1, 2021;
  • implementation of mandatory use of RCO and/or software RCO for individuals-entrepreneurs of Group II – IV of the simplified taxation system until April 1, 2021;
  • application of sanctions specified in paragraph 1 of Article 17 of the Law on RCO for violation of the order of settlement transactions until January 1, 2021.
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In trying to stand up to the common enemy of Covid-19, businesses are looking for new ways to preserve their liquidity and place in the market. Worldwide governments are trying to support entrepreneurs by introducing compensations and incentives for companies and their employees. The Government of Ukraine is also trying to help national business, but so far the only really effective support tool — tax holidays — remains only plans. Therefore, companies need to understand how to resist quarantine on their own.

  1. Accept the way it is now. The first and most important thing that the owner should do is to realize that the crisis will not end a week after leaving the quarantine. And even a month later. It is necessary to build a work plan based on the fact that according to the optimistic scenario, the world business will return to normal and resume the process of international trade around the beginning of the third quarter of 2020. This is if the regions in which the “corona” is now raging can stop the spread of the disease by the summer. Otherwise, if the disease can not be tamed and the world will stay under the quarantine lock until autumn, it is extremely difficult to make predictions. Therefore it is important to plan work in conditions of crisis and to allocate resources “with reserve”.
  2. Minimise the cash flow gap. This is one of the biggest risks that requires careful monitoring. In order to reduce the threat, it is necessary to implement system forecasting and redistribute cash flows. If there is a threat of a gap, try to revise the payment terms by agreement with contractors, suppliers and lessors. The postponement will really help to keep the company afloat. Remember that the forecast of cash flow in a crisis is the main management document of the owner.
  3. Marketing and sales are the focus. Optimize your costs, but do not reduce marketing and sales system as now, more than ever, you need to upgrade the effectiveness of all tools to attract customers. They must be accurate and aggressive. Only those companies that can competently build a sales funnel will survive the prolonged crisis. The processes are clear: for B2B we do strong analytics and accurate processes of finding potential customers, for B2C we tighten the system Internet marketing.
  4. Adapt your business model: Analyze how much market volume has decreased and how it can change after quarantine is completed. Analyzing the dynamics in the crisis of 2008 will help to understand the behavior of the market in extreme conditions. Develop a product line that will allow you to maintain positions and grow in a new market situation, or adapt existing products so that they increase your competitiveness. For an illustrative example, you can see how we managed to adapt the audit to the conditions of quarantine in Kreston GCG.
  5. Analyze and optimize costs. Conduct a ranking of costs. In category I: take the vital for the existence of the company, in category II: indicate the costs of the secondary value, and in category III: fix the auxiliary ones. In case you see serious financial problems on the horizon, reduce costs, starting with category III. If this does not work, analyze the importance of positions — unfortunately, the crisis forces many companies to reduce. But do not get carried away and do not think that by reducing 60% of the state you will avoid all problems and the crisis will pass you. Chaotically getting rid of staff you risk losing a valuable resource — trust and loyalty of employees, and it will never be possible to restore it.
  6. Control the funding. It is already clear that access to loans and financing will soon be at risk of deteriorating, and you should not rely on new external revenues. Therefore, we recommend that you conduct a dialogue with your bankers and discuss the possibility of opening or expanding credit lines. Talk to the shareholders and find out if they are ready to invest in the business in case of a strong decline in sales or bank failures. This must be done in order to confidently build a strategy of work and know your “backs”.

Any crisis is a natural selection, cleaning the market from weak companies. Whether your enterprise will survive the quarantine period and its consequences depend only on efficiency of management decisions and quality of anti-crisis strategy. When you take control of panic and learn to balance the storm waves of the market, you will open new opportunities for development. Use quarantine to tighten Internet marketing and sales management skills, test new technologies and increase personal efficiency.

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The world is in the process of adapting to the new conditions of doing business during the pandemic. We can say that Ukrainian entrepreneurs have a certain advantage over most colleagues from around the world, because not all of them are so regularly in stressful economic situations, so they are more difficult to experience the need to adapt to the crisis.

The ability to survive and make important managerial decisions in critical conditions is why domestic entrepreneurs are constantly studying from the date of Ukraine’s becoming statehood. Here began another “practical training” of this school of survival, the main task in which it is impossible to perform, if not to optimize your business.

How to legally reduce costs, use existing legal and technical tools and, as a result, increase the efficiency of your company?

Another national feature is that the domestic business almost counts on state aid, even in the critical period. However, do not forget to keep the control of important changes in the legal field, because this knowledge and competent application of law are one of the components of business optimization.

Total tax holidays about which the representatives of entrepreneurs ask the authorities for, meanwhile didn’t take place. However, certain benefits and other changes in the part of taxation have already been provided at the legislative level, taking into account the Law of Ukraine adopted on March 30, 2020 “On Amendments to Certain Legislative Acts to Provide Additional Social and Economic Guarantees in Connection with Spread of Coronavirus Disease (COVID-2019)”, which has not yet been signed by the President (Draft Law No. 3275 dated March 29, 2020). So the main changes are:

1) Total annual revenue limits will be increased for single tax payers:

  • of the first group from UAH 300 thousand up to UAH 1 million;
  • of the second group from UAH 1,5 million up to UAH 5 million;
  • of the third group from UAH 5 million to UAH 7 million

Use of registrars of calculated operations (hereinafter – the “RCO”) by the single tax payers, the annual revenue amount of which does not exceed UAH 1 million, except for taxpayers selling technically complex household goods or medicines and products of medical purposes, has already been postponed until 2021.

So far from January 1, 2021 to April 1, 2021. RCO will still be not applied by individuals – entrepreneurs – single tax payers, the revenue amount of which during a calendar year does not exceed UAH 1 million. However, there are those with an income of up to UAH 1 million who will still have to apply the RCO earlier, it is about those who will carry out the following activities from the beginning of 2021:

  • sale of goods or services via the Internet;
  • sale of technically complex household goods subject to warranty repair;
  • sale of medicines, products of medical purposes and provision of paid services in the field of health care;
  • sale of jewelry and household products;
  • retail trade of used goods in stores;
  • activity of restaurants, cafes, fast food restaurants;
  • travel agencies or operators;
  • hotels and means of temporary accommodation;
  • sale of textiles (except for markets);
  • sale of parts and accessories for vehicles in accordance with the list approved by the Government.

2) In the part of the personal income tax, the cost of medical equipment and medicines transferred as charity to public organizations or state institutions in 2020 may be attributed to a tax discount, which reduces personal income tax.

And earlier, the deadlines were postponed for two months: submission of the declaration was delayed from May 1 to July 1, and the deadline for payment of the declared amount of tax was from August 1 to October 1, 2020.

3) from March 1, 2020 to May 31, 2020, taxpayers are not charged or written off the already accrued penalty. Also, during the same period, penalties are not applied, except for violations in the field of VAT, excise tax and rent.

4) Moratorium on inspections of business by state authorities is established until June 30, 2020, except for:

  • business entities with a high degree of risk;
  • inspections in the sphere of state regulated prices and in the sphere of sanitary and epidemic welfare of the population.
  • tax audits, which have their own moratorium. Thus, from March 18, 2020 to May 31, 2020, there is a moratorium on conducting tax actual and documentary tax audits, except for unscheduled documentary audits on VAT refund from the budget. Such inspections can still be carried out if a refund for the amount of more than UAH 100 thousand is claimed. In other cases, on applications for refund of the amount of budgetary compensation, a desk audit is carried out, and in general, the desk audits do not fall under the moratorium, but the possibility of their implementation is limited to a period of 60 days from the deadline for submission of the corresponding declaration for the specified period.

At the same time, tax audits started before the moratorium are suspended for the period until the end of its validity. Also, the statute of limitations, which is usually 1095 days after the last day of the deadline for submission of the tax return, is also suspended for the moratorium.

5) The Law dated March 17, 2020 initially abolished the rent for land plots of state and municipal property for March and April 2020, as well as the land tax should not be paid.

However, on March 30, 2020 the Verkhovna Rada partially abolished this privilege, exempting from the land tax only the March period, and in April only granted a deferment until the end of June 2020.

If the land fee for March has already been made, individuals will recalculate the tax service, others must submit a clarifying tax return.

6) On the unified contribution to the obligatory state social insurance (USC), the following exemptions apply:

  • in the period March-May 2020, any penalties and penalties for late payment or late submission of reports are cancelled;
  • individuals – entrepreneurs, persons engaged in independent professional activities, and members of the farm are exempt from paying the USC for themselves in the period March-April 2020, but this period is included in the insurance period when registering a pension;
  • is not charged or written off already accrued penalty for possible past violations.

Also, from March 18 to May 31, 2020, a moratorium on audits on the USC is established.

7) registration of a significant list of medicines and medicines related to COVID-19 is exempted from VAT, customs duties and customs formalities outside the location of customs authorities or outside of working time. It is also established that customs registration of such goods has to be carried out first of all.

Such a list is approved by the Government Resolution dated March 20, 2020 No. № 224. Although the vast majority of products from it belong to hospitals and pharmacies, some positions (such as disinfectants, masks and protective suits) may be of interest to large businesses that cannot move to remote employment and require investments in antivirus self-defense. Industrial production, logistics companies, retail chains, representatives of wholesale trade can save by purchasing these goods without intermediaries and at the expense of accelerated and preferential customs clearance.

Also, by the end of 2022, the supply of medicines, medical devices and auxiliary products to them, purchased at the expense of the state budget by a person authorized to carry out procurement in the field of health care, is exempted from VAT. Within 3 months the Ministry of Health shall approve the procedure for such purchases.

8) Persons who are in health care institutions, as well as self-isolation under medical supervision in connection with quarantine measures in relation to COVID-19, shall receive payments from the Social Insurance Fund of Ukraine for temporary disability assistance in the amount of 50 percent of the average salary (income) regardless of the length of insurance.

9) Property owners are exempt from paying tax for this property other than a land plot in March 2020.

10) The duration of the terms for administrative appeal against the decisions of the tax authorities and the provision of responses to their requests shall be stopped and continued from June 1, 2020 (except for requests for verification of applications for budgetary VAT refund).

What other innovations are expected in the near future?

Very promptly prepared on March 29, 2020 and voted on the next day the draft Law of Ukraine “On Amendments to Certain Legislative Acts to Provide Additional Social and Economic Guarantees in Connection with Spread of Coronavirus Disease (COVID-2019)”, (already mentioned above Draft Law No 3275 dated March 29, 2020) also introduces other changes to the most diverse laws.

In our opinion, the most relevant for entrepreneurs are the following:

1) Suspension and prolongation of terms for the period of quarantine:

  • suspension of a restrictive 6-month period for charging penalties for violation of economic obligations during quarantine;
  • suspension of statute of limitations of both the general three-year and special terms during quarantine, in particular, in respect of claims on warranty obligations, claims arising from contract contracts in capital construction and contracts for carrying out design and research works;
  • the terms for the commission of the majority of procedural actions (change of claims, appeal, etc.) are also extended for the period of quarantine.
  • suspension of statute of limitations also in family disputes (concerning division of spouses’ property, as well as even in disputes concerning paternity and motherhood).

2) exclusion from the definition of the employment contract of the requirement to subordinate the employee to the internal labor regulations. Now it is indicated that the employee is obliged only to perform the work defined by this agreement.

At the same time, such concepts as remote (from home) work and flexible working hours are introduced, which can be established both when hiring and subsequently by agreement of the parties.

At the same time, during quarantine or other threats, the flexible working hours can be established in the order of the employer and without the obligatory conclusion in writing of an employment contract on remote (from home) work.

Flexible working hours can include:

  • a fixed time during which the employee must be present at the workplace, and the division of the working day into parts may be provided;
  • variable time during which the employee at his own discretion determines the periods of work within the established norm of the duration of working time;
  • time breaks for rest and meals.

Accounting of working time is provided by the employer. If necessary, the employer may temporarily (for a period of up to one month during a calendar year) apply to employees with a flexible regime, generally established at the enterprise work schedule. This is not considered a change in the essential working conditions, that is, it does not require the consent of the employee.

3) exemption of tenants from rent for the period of quarantine, if the property can not be used. This is relevant for tenants of premises in closed shopping malls, although in reality this norm does not introduce anything new, but only directly reminds of the existence of a similar rule in Part 6 of Article 762 of the Civil Code of Ukraine.

4) it is forbidden to increase the interest rate on loans during the quarantine. With regard to consumer loans, it is prohibited to apply penalties for late performance of duties by consumers from March to April 2020.

5) court sessions can be held in a videoconference mode outside the courtroom, and participants can participate in them using their own technical means.

6) the concept of partial unemployment allowance for the period of measures to prevent the occurrence and spread of coronavirus disease (COVID-19), provided for in quarantine, is introduced.

7) the requirement to hold an annual general meeting of joint-stock companies or corporate fund (collective investment institution), which had to be held before April 30, is canceled. Now the meetings must be held within 3 months after the completion of the quarantine, or can be held remotely in the manner approved by the National Commission on Securities and Stock Market.

In case of expiration of the term of office of members of supervisory boards of joint-stock companies, the powers of such members of supervisory boards shall be extended in full until the date of the general meeting of shareholders in the specified order.

A similar rule is introduced in 2020 for the postponement of the general meeting of limited or additional liability companies that are issuers of securities and credit unions.

8) meetings of local councils and their executive committees or permanent deputy commissions can be held remotely — in the mode of video conference or audio conferencing. However, only issues of urgent changes to the local budget, other issues, urgent work on the elimination of the consequences of emergency situations can be considered on them.

9) privatization (sale) of large privatization objects is terminated.

As you can see, quite a lot of changes appear in the legislation. It is possible that these of them are not the last for the period of quarantine. Under such conditions, real and legal optimization of business is possible with the combination of factors such as the ability to apply modern business technologies, the correct use of the current legislation, in particular, tax, and, most importantly, the desire of owners to make their business more efficient.

Our experience shows that in virtually every enterprise, even in which the model and all processes have been rebuilt for years, it is possible to find ways to save and optimize. At the same time, we are not talking about advice where you can buy cheaper stationery, but about a fresh professional view from the side and detailed tax, legal and technological analysis of existing algorithms. The synergy of knowledge of auditors and practicing lawyers often helps an entrepreneur to apply legal mechanisms, which he did not know, remove unnecessary costs, or rebuild the business so that operating costs help reduce tax costs. Business consultants help to impose such advice on real practice through the introduction of modern technical solutions or business practices.

Until recently, ordering the optimization of business was like to start a major overhaul of the apartment — and you want to do it better, but you do not want to endure even temporary inconveniences from changes. And now life is pushing to this decision, and those who did not think about optimizing their business before force majeure, are now forced to do so. Also those will do “overhaul” on an equal basis with colleagues who sought positive changes still “in a peace time”. So, experienced business consultants and auditors are now increasing and, honestly, there is no time to ask the question “what to do in quarantine?”.

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