04 March 2024
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The Law No. 3050: Expert explains changes for local self-government bodies/military administrations on setting individual tax exemptions

The Law No. 3050 "On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine on Exemption from Environmental Tax, Land Payment and Real Estate Tax Other Than a Land Plot for Destroyed or Damaged Real Estate" has recently come into force. What impact does it have on local self-government bodies and what are the new powers of municipalities?


The team of the U-LEAD with Europe Regional Office in Kharkiv Oblast organised an information session for municipalities of Kharkiv Oblast to inform the participants about the legislative changes in the field of financial and budgetary relations, to study the issues of exercising the local self-government powers in the public sector and to provide practical recommendations to improve their efficiency.

In particular, the participants were especially interested in exercising the local self-government powers to provide individual exemptions from local taxes and fees in accordance with the Law of Ukraine of 11.04.2023. No. 3050"On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine on Exemption from Environmental Tax, Land Payment and Real Estate Tax Other Than a Land Plot for Destroyed or Damaged Real Estate".

According to the speaker of the event, Maryna Honcharenko, Local Finance and Governance Advisor of this office, these issues are extremely important now, since the local self-government bodies have started to receive massive requests from taxpayers for their exemption from tax liabilities on local taxes and fees.

Here are the comments of Maryna Honcharenko on Law No. 3050 to clarify the changes for local self-government bodies/military administrations on setting individual tax exemptions:

Individual tax exemptions for local tax and fee payers may be set at the national or local levels, depending on the grounds.

NATIONAL PRIVILEGES

A national land payment privilege may be granted to a payer in the following cases:

  • the land plot used by the payer is located in the territories of active hostilities or temporarily occupied by the Russian Federation, as confirmed by the List of territories approved by the Order of the Ministry for Reintegration of the Temporarily Occupied Territories of Ukraine No. 309 of 22.12.2022;
  • the land plot is contaminated with explosive objects: the grounds for the privilege are the information/data of the State Land Cadastre, including on land plots surveyed by the mine action operators;
  • the land plot is under conservation: the grounds for the privilege are resolutions of the relevant executive authority or local self-government body managing state and municipal land plots in accordance with the powers defined in Article 122 of the Land Code of Ukraine on approval of the land management working project for the land plot conservation and information/data of the State Land Cadastre.

Such cases are not subject to accrual of the fourth group single tax.

The minimum tax liability is not determined for the period when the land payment or the fourth group single tax is not assessed.

The national real estate tax exemption is provided in the following cases:

  • for the real estate located in the territories of active hostilities or temporarily occupied by the Russian Federation territories of Ukraine, as confirmed by the List of territories approved by the Order of the Ministry for Reintegration of the Temporarily Occupied Territories of Ukraine No. 309 of 22.12.2022;
  • for destroyed residential and/or non-residential real estate as a result of hostilities, terrorist acts, sabotage caused by the armed aggression of the Russian Federation;
  • for damaged properties that require major repairs, reconstruction or restoration.

LOCAL PRIVILEGES

According to the Law No. 3050, local self-government bodies/military administrations may grant individual privileges to local tax and fee payers in certain cases, which requires the relevant decisions to be made.

  1. For local taxes and fees (in general), according to subpara. 12.3.7 of para. 12.3 of Article 12 of the TCU, may be adopted:

  • decisions on tax exemptions from local taxes and fees based on applications from taxpayers for land plots to be declared unusable due to the potential threat of their explosive contamination.

Decisions on granting such privileges should be made for each calendar year separately, subject to the availability of relevant taxpayer applications, and for a period not longer than the end of the current calendar year.

It is important to note that decisions on tax exemptions from local taxes and fees based on applications from taxpayers for land plots to be declared unusable due to the potential threat of their explosive contamination confirm the period of potential contamination of the territory and serves as a ground for non-accrual of land payments, as well as the fourth group single tax, minimum tax liability and environmental tax for this period.

Information on granting tax privileges for local taxes and/or fees based on taxpayer applications is provided to the controlling authorities at the land plots' location electronically within 10 calendar days from the date of the relevant decision, with the mandatory indication of the cadastral numbers of the land plots subject to the relevant decision.

  1. For the real estate tax on the property that as a result of hostilities, terrorist acts, sabotage caused by the armed aggression of the Russian Federation, suffered minor damage, suitable for living/use for the intended purpose and subject to restoration by means of current repairs, in accordance with subpara. 69.22 of the Final Provisions of the TCU, may be adopted:

  • decision to set the rate of real estate tax other than a land plot in an amount less than the real estate tax other than a land plot set by the decision of the relevant local self-government body for a certain type of real estate paid in the relevant territory;
  • decision on tax exemption for real estate other than a land plot for real estate items that suffered minor damage as a result of hostilities, terrorist acts, sabotage caused by the armed aggression of the Russian Federation against Ukraine.

Local self-government bodies/military administrations are obliged to submit copies of these decisions to the controlling authorities at the real estate location as of the first day of the relevant quarter within 15 days after the tax period ends.

  1. A number of legislative requirements are NOT applicable to the decisions of local self-government bodies/military administrations on individual tax exemptions in the above-mentioned cases and decisions on amending them, in particular:

  1. The inability to amend any elements of taxes and fees later than six months before the beginning of the new budget period when the new rules and rates are to be in force, as well as the inability to change tax exemptions during the budget year (subpara. 4.1.9 of para. 4.1 of art. 4 of the TCU)

  2. The application of privileges upon their setting or extension of the existing ones only starting from the next budget year (para. 4.5 of art. 4 of the TCU)

  3. Sending a decision within ten days from the decision-making date, but no later than 25 July of the year prior to the budget period, to the controlling authority (subpara. 12.3.3 of para. 12.3 of art. 12 of the TCU)

  4. Mandatory official publication of the decision prior to 25 July of the decision year (subpara. 12.3.4 of para. 12.3 of art. 12 of the TCU)

  5. Ban on the setting individual preferential rates or tax exemption (subpara. 12.3.7 of para. 12.3 of art. 12 of the TCU)

  6. Requirements of the Ukrainian Law "On the Principles of the State Regulatory Policy in the Field of Economic Activity"

  7. Requirements of part 4 of Article 15 of the Ukrainian Law "On Access to Public Information" on publication of draft decisions by local self-government bodies/military administrations no later than 10 working days prior to the consideration for adoption

  8. Requirements of the Ukrainian Law "On state aid to undertakings".

"It is important to differentiate cases of applying national privileges provided for by the Tax Code of Ukraine and cases of setting local privileges subject to decision-making by local self-government bodies/military administrations. This enables local self-government bodies/military administrations to effectively interact and communicate with the payers and avoid unnecessary bureaucratic work," Marina Honcharenko summed up.

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