Ukraine is on martial law in connection with the full-scale Russian invasion on February 24, and a general mobilization has been announced by Presidential Decree 69/2022. Together with Iryna Syroid, a Trustme Law Firm attorney, we found out the procedure for conscripts and whether they have benefits for paying taxes and reporting during military service.
Private entrepreneurs are not exempt from mobilization. The order of conscription is general. Exception – for persons who are unfit for health, have three or more children under 18, independently raise a child (children) under 18, i.e., without the other parent, have a child with a disability, are guardians, guardians, foster parents, foster parents, engaged in constant care for those in need, etc.
No, mobilization does not mean automatic or forced liquidation of private entrepreneur status. If the company does not terminate cooperation with you at the time of conscription, you do not need to do anything with private entrepreneur activity. If it terminates, but you plan to continue working in the IT-sphere after demobilization, you will need private entrepreneur status than you do not need to close it either.
There is a nuance only for the mobilized private entrepreneur, who has employees. The sole proprietor may continue to operate, but he must appoint an authorized person in advance to charge and coordinate the employees’ salaries. You must sign a power of attorney from a notary to do this. Employee taxes must be paid. If the mobilized person is not ready for such an option, he can liquidate the sole proprietorship and terminate employment contracts with employees.
If you decide to liquidate a sole proprietorship, keep in mind that it is possible to stop doing business when martial law is in place, but the work of registries and state registrars is limited. Therefore, the removal of private entrepreneurs from tax accounting and verification will take place later, as there is now a moratorium on tax audits.
IT private entrepreneurs specialists are usually on a simplified taxation system (group 3, single tax rate 5%) and pay a single tax and SSC (the Single Social Payment). For the period of mobilization, sole proprietors are exempt from their payment and reporting (in accordance with paragraph 25 of subsection 10 “Other transitional provisions” of the Tax Code of Ukraine and 9-2 of section VIII “Final and transitional provisions” of the Law of Ukraine “On collection and accounting of single contribution “mandatory state social insurance”). But you need to write a statement and provide a copy of the military ID (or another conscription document). Documents must be submitted to the tax office at the place of registration within 10 days after demobilization (or after treatment).
If the company with which the private individual cooperates keeps payment for him during his military service, he is still exempt from taxes.
In general, tax and reporting benefits apply to all private entrepreneurs called up for military service and are valid throughout the period. Also, in accordance with the Law of Ukraine “On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine on the peculiarities of taxation and reporting during martial law” № 2118-IX from 03.03.2022, there are general “mitigations” for taxpayers. Separately, exemption from liability for violation of deadlines for payment of taxes and fees, submission of reports, sanctions are not applied for violation of the legislation on RSO (the Registrar of Settlement Operations). There is a moratorium on tax audits.
It should be noted that private individuals in the general taxation system are exempt from all taxes (PIT (the Personal Income Tax), SSP (the Single Social Payment)), except for military duty.
As for those who pay VAT (the Value-added Tax), according to the Law of Ukraine, “On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine on the application of norms for the period of martial law” № 2120-IX of 15.03.2022: “Single taxpayers of the third group are released from the obligation to accrue, pay and submit value-added tax reports on transactions for the supply of goods, works, and services, the place of supply of which is located in the customs territory of Ukraine.
If there are employees, the private entrepreneur appoints an authorized person for the period of its military service – we have already mentioned this above. It pays salaries to employees, accrues and withholds personal income tax, military duty, and accrues SSP (the Single Social Payment).
Regarding SSP (the Single Social Payment) for employees called up for military service in the Armed Forces. According to Law № 2120-IX, natural persons-entrepreneurs belonging to the 2nd and 3rd groups of single taxpayers have the right not to pay SSP (the Single Social Payment) for such employees. In this case, the SSP (the Single Social Payment) will be paid by the state from the state budget.
The private entrepreneurs pay employee taxes within 180 calendar days from the first day of demobilization (excluding penalties and financial sanctions). Reporting is submitted within the deadlines set by law; fines and penalties for late submission are not accrued.
There are no special service payments for private entrepreneurs. But now, regardless of mobilization, all private individuals are entitled to receive a one-time cash benefit of UAH 6,500 if tax returns for the fourth quarter of 2021 or the entire 2021 are submitted. The only condition to receive assistance is that a private individual must be registered in regions where active hostilities are taking place (Chernihiv, Sumy, Kharkiv, Kherson, Mykolaiv, Zaporizhia, Donetsk, Luhansk, Kyiv, Zhytomyr, Odesa, Volyn, Dnipropetrovsk regions, and the city of Kyiv).
Guarantees for the duration of state or public duties related to mobilization apply only to employees. Workers called up for military service retain their jobs, positions, and average earnings.
The material is prepared for DOU
The author of the material:
Iryna Syroid, attorney at Trustme Law Firm