During the period of martial law in Ukraine, tax legislation and the Budget Code underwent significant changes. One of the innovations was the minimum tax liability, which begins to fully operate in 2023.
The team of the regional office “U-LEAD with Europe” in the Lviv region organized an information session on the topic “Implementation of the minimum tax liability”. The event was attended by financiers from Lviv, Volyn, Rivne, Ternopil, Zakarpattia and Ivano-Frankivsk regions.
“The minimum tax liability is a new norm in the current legislation. U-LEAD experts analyzed the innovations and prepared clarifications for territorial communities, which need to receive a practical toolkit for implementing changes in practice,” said Halyna Khrushchak, head of the regional office of “U-LEAD with Europe” in the Lviv region.
According to U-LEAD municipal finance and management adviser Yury Golynskyi, the concept of minimum tax liability appeared in Ukrainian legislation in 2021, when Law of Ukraine No. 1914 of November 30, 2021 was adopted. The first year when the minimum tax liability is determined is 2022.
Yurii Golynskyi noted that the minimum tax liability (MTR) applies to entities that own or use the rights of lease, sublease, emphyteussis, permanent use of land plots classified as agricultural land.
“Studies were conducted in Ukraine, which showed that a third of the leased land plots in Ukraine are in the “gray zone”. The legislator decided to correct this situation by introducing a minimum tax introduction. There are also estimates that, thanks to such changes, revenues to local budgets will increase,” the expert said.
The expert said that such an innovation is primarily intended to remove agricultural land from shadow cultivation, which will automatically reduce the loss of local budgets from non-payment of taxes.
The minimum tax liability includes corporate income tax, personal income tax and military tax on the sale of own agricultural products, a single tax and land tax.
The innovation requires legal entities and FPOs to independently declare whether or not they have fulfilled the MFZ. Instead, for individuals, it will be calculated and compared with the amount of taxes paid by the State Tax Service until July 1, following the reporting period.
As Nataliya Lyubchenko, advisor on issues of municipal finances and management of the Regional Office of U-LEAD in Khmelnytskyi region, emphasized, a number of land plots, the list of which is set out in the legislation, are exempted from payment of land tax. In particular, this applies to land plots used by dacha or garden cooperatives, reserve land, unclaimed shares, land plots located in the Chernobyl zone, etc.
In addition, in accordance with the changes introduced by Law No. 2120-IX, for the reporting years 2022 and 2023, the MPZ is temporarily not calculated and paid for land plots located in temporarily occupied territories or in territories where hostilities are taking place, as well as those that defined as littered with explosive objects and/or on which there are fortifications.
“Also, land plots classified as agricultural land under the right of ownership or use and located within the settlement as of January 1, 2022, are exempted from payment of land tax,” the expert added.
Experts also told the communities about the formula for determining the minimum tax liability and their role in this process.
The Ukraine Program for Local Empowerment, Accountability and Development “U-LEAD with Europe” is jointly funded by the EU and its member states Germany, Poland, Sweden, Denmark, Estonia and Slovenia to support Ukraine on its way to strengthen local municipality. U-LEAD promotes transparent, accountable and multi-level governance in Ukraine that meets the needs of citizens and empowers communities.