Quarantine and taxes: what changes for business?
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:
- of the first group from UAH 300 thousand to UAH 1 million;
- of the second group from UAH 1,5 million to UAH 5 million;
- 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:
- Individuals entrepreneurs, including those who have chosen a simplified taxation system;
- 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;
- 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.