Following implementation of COVID-19 quarantine measures in Ukraine on March 12, 2020 (with a planned termination date of May 22, 2020), the Ukrainian Parliament has adopted several laws to help businesses and the general population cope with financial difficulties and economic consequences during the Coronavirus crisis. For more information on effective quarantine limitations in Ukraine, please refer to our blog post Coronavirus Latest Updates in Ukraine.
Quick Overview of Major Changes
Quarantine was recognized Force-Majeure by Law
The Law of Ukraine “On Chambers of Commerce in Ukraine” was amended to declare quarantine to be a force-majeure circumstance under law.
Nevertheless, businesses who refer to quarantine as force majeure with their counterparties should still obtain a Certificate of Force-Majeure from the Chamber of Commerce in Ukraine to prove that non-performance was truly due to force majeure (and not based on other causes).
Two Months’ Cancellation of Social Security Tax for Private Entrepreneurs
From March 1, 2020, until April 30, 2020, private entrepreneurs (using both the Simplified Tax and General Tax schemes), self-employed professionals (including lawyers, notaries, self-employed doctors, artists, etc.) and members of farm enterprises are released from paying Social Security Tax. Additionally, local authorities are allowed to adopt decisions to temporarily cancel or decrease unified tax payment in specific regions. For example, according to a Decision of the Ivano-Frankivska city council, private entrepreneurs registered in Ivano-Frankivsk on the Simplified Tax scheme of the 1st and 2nd group were released from paying unified tax in April.
Extended Deadline for Annual Tax Declaration and Tax Payment for Individuals
The deadline for filing annual tax declarations for individuals for 2019 has been extended until July 1, 2020. Payment of individual tax (which was not taxed at source) for 2019 is extended until October 1, 2020.
One-Month Vacation from Tax On Land
From March 1, 2020, to March 31, 2020, individuals and businesses are released from the tax on state and municipal land which is normally used for business activity.
One-Month Vacation from Tax on Commercial Real Estate
From March 1, 2020, to March 31, 2020, individuals and businesses are released from the tax on commercial real estate.
Extension of Terms for Administrative Services
Since the moment quarantine was announced (March 12, 2020) all terms for applying for and receiving administrative services have been extended for the period of quarantine (taking into consideration the time that elapsed before the commencement of quarantine).
Additionally, for the period of quarantine, Law #540-IX allows the Cabinet of Ministers of Ukraine to adopt a decision to temporarily stop issuing work permits to foreigners in some regions OR for particular occupations. Please note that as of the day of writing of this blog post, such a decision had not been adopted and work permits could still be issued under normal terms.
Cancellation of Liability for Overstay for Foreigners
Foreigners who were present legally in Ukraine on the day quarantine began (March 12) and were not able to leave Ukraine and/or extend their visa/residence permit due to quarantine will not be penalized. However, within 30 days of the end of quarantine, such foreigners will be obliged either to apply for a residence permit (based on valid grounds) OR leave Ukraine.
Foreigners who were not able to apply for or extend a residence permit due to quarantine measures and, as a result, violated the terms of application as specified in law, will be able to do that within 30 days upon the end of quarantine.
Temporary Cancellation of Rental Fees
Tenants who are unable to factually use a leased property can be released from the rental fee for the period of quarantine.
Extension of Non-Paid Vacation Term
In general, employees in Ukraine, in addition to annual paid vacation (24 calendar days by law), are allowed 15 calendar days of unpaid vacation per year by reason of “family circumstances.” However, the Labor Code of Ukraine was amended with a provision that unpaid vacation taken by employees during quarantine is not included in these 15 days. (This basically means that it can exceed the above term for an unlimited number of days within quarantine.)
Please note that, according to Ukrainian law, unpaid vacation time is provided solely on the basis of employee application.
Working From Home and Flexible Hours
Employers can allow their employees to work from home for a certain period of time, OR, subject to the employees’ consent, to take vacation time. Working from home must not lead to a decrease in the employee’s salary, unless otherwise agreed in writing between the employer and employee.
The Labour Code of Ukraine was amended to regulate the possibility of remote work and work with flexible hours. Working with flexible hours must not lead to a decrease in the salary of an employee.
Payment of Salary to Employees during Lockdown
If the employee cannot carry out normal duties for reasons that are not the employee’s fault, the company must continue paying salary and salary taxes in the amount of two-thirds of the normal salary.
Sick Leave Payment for Persons who are Subject to Self-Isolation or Hospitalization
Ukrainian citizens who are on mandatory self-isolation or hospitalization due to COVID-19 measures will be entitled to receive sick leave payments starting from the 6th day of such self-isolation/hospitalization, at the cost of the Social Security Tax Fund, irrespective of the fact of termination of employment/private entrepreneur business activity, in the amount of 50% of average salary/income. Please note that the first 6 days of temporary incapacity for employees is paid at the cost of the employer.
Bonuses for Medical Staff
Additional bonuses in the amount of up to 300% of wages to medical employees engaged in localization and treatment of COVID-19.
Status of Unemployed Person
During the period of quarantine, persons who lost their job can apply for unemployment status and receive unemployment assistance from the day of application. Application for unemployment status and receipt of unemployment assistance does not require a physical visit to the Labor Office. As stated in law, to receive the status of unemployed, the applicant can contact the Labour Office of Ukraine via phone or email.
On April 27, 2020, the Ukrainian Government adopted a decision to allocate UAH 6 millard for financing unemployment assistance in Ukraine.
Implementation of Partial Unemployment Assistance
Employers that were forced to temporarily stop production for at least for 3 months and not more than 6 months for reasons beyond their control are entitled to obtain partial unemployment assistance from the government for their employees (subject to certain conditions). Once such assistance is received, the employer must pay it to the employees.
As a general rule, to qualify an employee must have worked at least 6 months of the preceding 12-month period before the production stoppage (or cutback) and must have had their working hours cut by at least 50% without an end to the employment contract. Partial unemployment assistance is not available if production stoppages (cutbacks) are seasonal in nature or occur solely for organizational and production reasons.
For the period of quarantine, the Government has simplified the process of obtaining partial unemployment assistance for employees of small and medium-sized enterprises. Employees who lost part of their income due to quarantine measures are entitled to receive such assistance, providing their employer has no social security tax debt for the 5 preceding years.
The amount of such benefit is calculated as two-thirds of standard salary for “missed working hours” and based on available financing, but in total cannot exceed the minimum living wage (in 2020, UAH 2102 per month for each employee).
Ban On Penalties for Violation of Tax Legislation
From March 1 until May 31, 2020, penalties for violation of tax legislation do not apply (with some exceptions as listed in law).
Temporary Release of Liability for Delay in Social Security Tax Payment
From March 1, 2020, until May 31, 2020, penalties do not apply:
- For violations in the terms of payment of social security tax;
- For failure to pay in full or non-timely payment of social security tax;
- For non-timely social security tax reporting.
Temporary Ban on Planned Government Supervision (Control) Measures and Tax Inspections
Government-planned business supervision measures are not allowed until June 30, 2020, with certain exceptions. The following types of planned government supervision of businesses are allowed:
- businesses that are engaged in activities with a high level of risk;
- related to government price controls;
- in the area of sanctuary and epidemiological security of the population.
Additionally, the Ukrainian Parliament has implemented a moratorium on documentary and physical tax inspections for the period from March 13, 2020, until May 31, 2020. One exception is that documentary non-planned tax audits related to VAT recovery and some others as specified in Law are not suspended. However, a 3-year term of “tax liability” is also extended for the same period.
There is a moratorium on social security documentary tax inspections for the period from March 18, 2020, until May 31, 2020.
Certain Amendments related to Joint Stock Companies
Law # 540-IX sets forth a legal framework for JSCs for the period of quarantine, to release them and their executives from liability for a delay in opening up annual information about the issuer, putting off the terms for holding an annual general shareholders meeting, and extension of terms for Supervisory Board members. This law also allows for holding annual general shareholders meetings remotely, under temporary procedures, approved by the National Securities Commission of Ukraine and some others.
Government Price Controls
The Government is expected to establish government price controls for medical products and “social goods”.
Temporary Ban on Penalties for Delay in Payments under Retail Loan Agreements
From March 1 to April 30, 2020, penalties may not be imposed if an individual fails to perform payment under a retail loan agreement, with some exceptions. No increase in the interest rate is permitted, unless the loan is subject to a floating interest rate.
Temporary Ban to Impose Liability for Delay in Payment of Utilities
During the period of quarantine and 30 days after its termination, suppliers are not permitted to:
- Impose any penalties for a delay in payment for utilities;
- Stop providing utilities to citizens of Ukraine for non-payment of utilities;
- Enforce eviction from a residential property, apartment, room, or house for non-payment of utilities.
Extended Time Limits
- Tax administrative contestations are paused until May 31.
- Certain time limits specified in the Commercial Code of Ukraine were extended for the period of quarantine, including:
- Time limits when penalties can be imposed for contractual non-performance (standard term — up to 6 months unless otherwise specified in the agreement between the parties);
- Time limits of statutory service life of goods and time limits for application to commercial court related to quality of the goods;
- Time limits of action in case of non-quality services under construction contracts and/or in design project documentation.
- Certain time limits specified in the Family Code of Ukraine were extended for the period of quarantine, including:
- Period of limitation of action for mandatory division of common property of a spouse after divorce;
- Period of limitation of action for recognizing yourself as a father of a child;
- Period of limitation of action for disputing the fact of being a mother.
- Certain time limits specified in the Civil Code of Ukraine were extended for the period of quarantine, including:
- Period of limitation of action for civil disputes;
- Time limits related to realization of priority rights;
- Time limits of validity of surety
- Certain time limits specified in the Labour Code of Ukraine were extended for the period of quarantine, including:
- Period of limitation of action for employees to dispute unlawful dismissal
- Procedural time limits specified in the Code of Administrative Legal Proceedings of Ukraine, Code of Criminal Legal Proceedings of Ukraine, Code of Civil Legal Proceedings, and the Code of Commercial Legal Proceedings are to be extended for the period of quarantine.
Attendance at Court Hearings via Telecommunication Channels
The law allows for arranging administrative, criminal, civil, and commercial court hearings through videoconferences, using telecommunication channels beyond court premises. Identification can be made through electronic digital signature or other means as listed in law.
Temporary Cancellation of VAT and Import Duty for Anti-Covid-19 Medicinal Products
Ukraine has temporarily cancelled VAT and import duties on medicine and medical equipment related to COVID-19.
Special Rules for Charity Contributions
Individuals and businesses who made charitable contributions by buying medical equipment and medicine for combating COVID-19 will be able to decrease their tax obligations in accordance with the rules set forth by the Tax Code of Ukraine.
In summary, these changes are important for helping Ukraine cope with a public health crisis that is unprecedented and global. However, in our opinion, these economic measures lay most of the burden on the shoulders of businesses as employers. This may lead, unfortunately, to multiple bankruptcies of small to midsize businesses and eventually to a drastic increase in unemployment.
In our opinion, during these times of lockdown and economic instability, the main task for the Government is to find an effective compromise between the rights and interests of businesses and those of the general population, as we together deal with the impact of the Coronavirus on Ukraine.
ContactUkraine team wishes you and your beloved ones strong health and patience at this difficult time.
Should you have any further questions or require assistance, please do not hesitate to contact us.