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?”.