COVID-19 Countermeasures in Ukraine

The introduction of quarantine in Ukraine entails the need to rearrange working hours of many companies. Not only should the employer decide what measures will be taken by him but also formalize this decision properly to avoid violations of labour legislation.

Such solutions could be:

• Pay leave (basic or additional) is possible only under the application of the employee and could not last more than the term settled by legislation and unused part of the leave.
• No-wage leave is also possible upon the application of the employee and only for the quarantine period.
• Idle mode - allows you to regulate the employment of individual units or companies as a whole. Since such an idle mode is not due to the fault of the employee, it is paid in the amount of 2/3 of the official salary. The period of idle mode is not limited by law.
• The transfer of workers to remote (home) work for the period of quarantine - allows keeping employment and workers' wages.
• It should also be mentioned that the introduction of quarantine in the company, measures for the protection of workers from infection should be reflected in the company's occupational work and safety documents (for example, purchasing disinfectants, instructions on sanitizing hands, working surfaces, etc.) to reduce the risk of bringing the employer to liability for violations in the field of labour protection.
• Please note, that the legislation that has introduced the quarantine does not provide the exemption of employers from liability for violations of labour laws, therefore, proper documentation of the employer's decisions helps to reduce the risk of imposition of fines.
• The employees of the small and middle legal entities may receive the  allowance  related to the partial unemployment due to the quarantine.

1. Key tax issues

Incentives for small business

Individual entrepreneurs and legal entities, chosen simplified (single) model of taxation, have got i) increased capholds for the annual revenue to stay enjoying such model; ii) exemptions for the social security contributions for the March and April.

For whom: IT/IP business, direct sales, construction and development, transport and logistics industries, where individual entrepreneurs are generally engaged
What can we propose: revision of business models to enjoy new opportunities

VAT and customs

VAT and customs duty exemptions for the import and sale of medicines and medical equipment within the term of quarantine;

For whom: Pharmaceutical and medicine industries, distributors of medicines
What can we propose: careful structuring of sale-chains in order to avoid unnecessary VAT losses

Donation deductibility

Donations are fully deductible for corporate profit tax purposes

For whom: Any business wishing to contribute in combatting virus
What can we propose: tax and legal structuring of the three-lateral agreements between donors, suppliers of medicines and hospitals

Land and real estate tax exemptions

Exemptions for land and reals estate taxes are introduced

For whom: Agriculture, construction and development
What can we propose: advisory on tax compliance

Other incentives

Adjustment of terms for the submission of tax declarations, conduct of tax and other official audits, appeal procedures, moratorium for the tax and social security contributions’ penalties, etc.

For whom: Various businesses
What can we propose: advisory on tax compliance

2. Other tax issues

• Moratorium on the application of penalties for violations of tax legislation, made in the period 01.03.2020-31.05.2020, except for several ones, in particular, violations of accrual, declaration, and payment of VAT, excise tax, rent.

Please note the following:

• the above incentives should apply to penalties for late registration of VAT-invoices;
• this moratorium does not exempt from penalties for violations of non-tax legislation (but there are separate exemptions for the penalties in area of fiscal control over cash payments - see below in para. 8-9 of this comment);

• Moratorium on the conduct of tax audits for the period from 18.03.2020 to 31.05.2020, except for the audits aiming at confirmation of VAT refund). In this case:
  • scheduled inspections, that fall in the period of moratorium, are not canceled, but should be delayed to another period (will be published in the updated schedule);
  • inspections initiated before 18 March should be put on hold till 31 May 2020;
  • moratorium for the period from March 18 through May 18 is also introduced for the audits over mandatory social contribution;

• It is also introduced a moratorium on carrying out non-tax audits in the various areas of economic activities
• Extension of the period for submitting of Individuals revenues’ declaration - from May 1 to July 1, 2020. In this case, payment of tax liabilities for such a declaration is also postponed until October 1, 2020;
• For the period of moratorium, the land tax shall not be assessed by individuals or legal entities using the land for economic activities.
• Non-residential real estate owned by individuals or legal entities is not subject to real estate tax from 01.03.2020 to 30.04.2020;
• Coming from the above the tax audit and accrual of tax liabilities (Article 102 of the Tax Code) shall be put on hold from March 18 to May 31, 2020;
• The exemptions for mandatory social contribution for the certain taxpayers (mainly entrepreneurs) are introduced, maximum turnover for self-employed inreased;
• The restrictive measures/requirements for the fiscal control over cash payments are delayed for three months;
• Penalties for non-compliance in area of the fiscal control over cash payments are reduced.

1. Other key issues

• Adjustment of terms for the completion and publishing of audited financial statements
• Exemption for the tenants to pay rent under the certain circumstances;
• Prohibition to increase the interest rate under the loan agreements with banks/ financial institutions;
• Additional regulations for the remote work
• Limitation periods extension
• Upgrading of penalties for the violation of pricing regulations

For whom: Various businesses
What can we propose: advisory and legal support over the confirmation of force-majeure of the contract obligations; support of negotiations of the clients with their counterparties, personnel engagement structuring etc

2. Contract obligations

Recognition of COVID-19 as a force majeure

• Given the introduction of quarantine from March 12 to April 3, 2020 on the territory of Ukraine and the introduction of restrictions defined by the resolution of the Cabinet of Ministers of Ukraine on March 11, 2020 No. 211 «On preventing the spread of coronavirus COVID-19 in Ukraine», there is an issue of recognition of the quarantine as a force majeure.
• Under the legislation of Ukraine, force majeure is understood as extraordinary and unavoidable circumstances, that objectively make it impossible to fulfil the obligations stipulated by the terms and conditions of the contract ( agreement, etc.), obligations under legislation and other legal acts.
• The party to the contract that refers to force majeure shall apply to the competent authority of the country in which such circumstances arose and obtain the relevant document (certificate or license), for the possibility of presenting it to the counterparty according to the terms and conditions of the contract.

Pursuant to article 14-1 of the Law of Ukraine «Chambers of Commerce and Industry of Ukraine» quarantine is considered as a force majeure circumstance.

• Also, to obtain a certificate of Chamber of Commerce and Industry the party to the contract shall provide a proof that coronavirus or measures to combat its spread, such as closure of borders, travel bans and other measures taken at the level of government authorities, are circumstances that could lead to the impossibility of fulfilling the obligation under the contact.
• We draw your attention to the fact that financial and economic crisis, default, growth of official and commercial foreign exchange rates to the national currency, etc., are not force majeure circumstances.
• Our specialists will help you to understand and protect yourself from financial losses connected with the introduction of restrictive measures.

Rental fees and credit rates limitations

• During official quarantine tenants are waived from the obligation of paying rental fees for use of property.
• It is forbidden, during the epidemics period, to increase credit rates.

The above mentioned rules are obligatory and do not require consent or contract amendments with lessee.

3. Regulatory restrictions/ miscellaneous

The Cabinet of Ministers of Ukraine has amended the measures to fight coronavirus infection

• Since 06 April all persons, which are in the public places, shall use the respiratory protective devices and medical face masks.
• Since 06 April people may only relocate by two persons, except for a work necessity and assistance of minor persons.
• Since 04 April , all mass events (cultural, recreational, sport, social, religious, advertising and other) have been prohibited in Ukraine. Only measures which are necessary to ensure the work of State and local authorities are permitted.
• Since 17 March, catering establishments (restaurants, cafes), shopping and entertainment centres, other entertainment institutions, fitness centres, cultural, commercial and public service institutions have been required to suspend their activities.
• It is permitted to provide catering services with the use of targeted delivery of the order, provided that personal is provided with personnel protective equipment.
• Foodstuffs, fuel, hygiene products, medicines and medical products, seeds, products for agriculture and animal production, and products of vital necessity may be traded. 
• Banking and insurance activities can also be carried out.
• Between 17 March and 24 April, railway, air and bus transport and inter-regional transport, as well as subway transportation are prohibited.
• There are some carriages which are authorized: carriage by the private motor vehicle; carriage in the cars which are owned or leased by the certain legal entities and the State authorities; carriage of certain categories of the persons in trams, trolleybuses and road transport, in buses carrying out regular passenger transport on urban routes within the limits of the places in tram, trolleybus, road transport, and bus provided that the passengers and the driver use the respiratory protective devices and medical face masks.
• The Ministry of Health has been instructed to suspend scheduled hospitalization and scheduled operations, except for immediate and urgent ones.
• The Ministry of Internal Affairs and the National Police are responsible for monitoring the implementation of the Government Regulation. Authorities, enterprises and organizations are encouraged to provide shift work for employees, and in case of technical possibility – work also online.