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Chief Accountant

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TAXATION DURING MILITARY STATUS

The imposition of martial law in Ukraine has created new realities for doing business. Such realities have also affected the bodies that shape tax policy, in particular in terms of taxation. Therefore, consider the most discussed change, which allows most businesses to move to a simplified system of taxation.

The well-known 3rd group of the simplified taxation system has existed for a long time without changes: 5 percent of income, or 3 percent of income plus VAT. However, there were restrictions on the allowable annual turnover. At the same time, the state decided to create transparent and simplified conditions for doing business for a large part of it.

The main changes concern the following:

  • Tax rates;
  • Annual income;
  • List of permitted activities;
  • Reporting period.

As for the tax rate, it is set at 2 percent of the income of such an entity. The annual amount of income on such a special tax system is currently unlimited, although various “thresholds” have been set before.

Unlimited turnover is an extremely interesting factor for choosing such a system of taxation by big business, which has recently suffered from the peculiarities of VAT administration, suspension of registration of tax invoices or recognition of the business entity as meeting the risk criteria of the taxpayer. Therefore, for large businesses, this is an interesting option for determining your tax system. If we take into account the tax burden of VAT and income tax, it will in most cases exceed 2 percent, which is allowed on a special simplified taxation system. Therefore, we recommend that large businesses identify in detail the existing tax burden, the risks of suspending the registration of tax invoices and consider, based on the results of such an assessment, the possibility of moving to a simplified tax system at a rate of 2 %.

As for the permitted activities, the prohibitions apply to those entities that manufacture, export, import, sell excisable goods, mining, sale of minerals, brokers, banks, credit unions, pawnshops, leasing companies, etc. That is, restrictions on the NACE will not affect most businesses.

The changes also affected the reporting period, which is now 1 calendar month. You will have 10 days after the last reporting date to pay your taxes.

For VAT payers, registration as a VAT payer is suspended for the period of the business entity’s stay on the “special” simplified taxation system. You will also be exempt from submitting VAT tax returns and charging and paying VAT on transactions for the supply of goods, works and services in the customs territory of Ukraine, as well as in the case of importation of goods into the customs territory of Ukraine.

If you need more detailed tax advice, determination of your tax burden or accounting and legal services in general – contact the Law Firm “Prikhodko and Partners”, we will be happy to help you.

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