Ukraine’s State Fiscal Service has released two information letters (No. 7 of March 23 and No. 8 of April 3) that explain some of the new tax measures introduced to cope with the COVID-19 pandemic.
Corporate Tax
In line with Tax Code amendments introduced by Law 540-IX (dated March 30) that became effective April 2, corporate taxpayers may deduct from their corporate tax base — in full and without any limits through the end of the state-imposed quarantine — all expenses incurred in connection with the voluntary gratuitous transfer of the following:
money;
medicines for patients;
disinfectants and antiseptics;
medical equipment and supplies, including lab equipment and reagents for lab research and treatment of infectious diseases and other similar pathologies;
personal protection equipment;
medical products to screen patients;
personal hygiene products;
food; and
other goods on the government-approved list.
To be eligible for the full deduction, the transfers must be made to:
public associations and charitable organizations;
the Ministry of Health and other executive bodies that implement state policy in the areas of sanitary and epidemic well-being of the population, quality control and safety of medicines, and combating AIDS and other socially dangerous diseases;
the State Enterprise Agency on Medical Procurement of Ukraine; and
public healthcare institutions.
Corporate taxpayers making these transfers must keep separate tax accounting for those operations.
VAT
A VAT exemption applies to imports or supplies in Ukraine’s customs territory of government-approved goods (including medicines and medical devices and equipment) necessary to implement measures to prevent the localization and spread of epidemics and pandemics. The list of goods was approved by government decision No. 224 of March 20.
The VAT exemption applies from March 17 through the last day of the month in which the government-imposed quarantine ends. It applies to all stages in the supply of goods, regardless of their date of production and origin, whether the supply is made by individuals or legal entities considered to be VAT payers in Ukraine, and whether the goods were imported before March 17.
The State Fiscal Service also said taxpayers carrying out these imports and supplies are not subject to the provisions of Tax Code article 198, section 198.5, and article 199. Those articles stipulate that a VAT payer must repay to the budget the VAT that it previously deducted on the acquisition of goods, services, and fixed assets if it put those goods, services, or fixed assets to use in VAT-exempt transactions.
Other Matters
Based on Tax Code amendments introduced by Law 533-IX (dated March 17), no penalties will be imposed (and those already imposed but unpaid will be written off) for breaches of tax legislation committed from March 1 though May 31. However, this waiver does not apply to breaches of rules regarding the calculation, declaration, and payment of VAT (like failure to file or late filing of VAT reporting documents and failure to pay or late payment of the VAT due).
The tax amendments introduced a moratorium on tax audits from March 18 though May 31. Tax audits initiated before March 18 are temporarily suspended until May 18.
Iurie Lungu, lawyer, Montreal