Businesses need to amend the list of combat areas

Business continues not only to operate but also to develop in most of Ukraine. At the same time, there are still territories that have been severely affected by the war that Russia has unleashed on the territory of Ukraine. In this vein, to stimulate economic activity, support for entrepreneurs there is extremely important.

However, today the issue of not classifying some frontline regions as areas of active hostilities remains problematic, and therefore companies located in these areas are deprived of certain types of support, such as exemption from land tax, real estate tax, economic tax, etc. In fact, it is a matter of not applying the provisions of the Tax Code of Ukraine on exemption from certain types of taxation.

For example, the Law of Ukraine "On Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine on Exemption from Environmental Tax, Land Payment and Tax on Real Estate Other Than a Land Plot for Destroyed or Damaged Real Estate" No. 3050-IX of April 11, 2023, provides, in particular that owners and users of land plots and real estate do not accrue and pay land fees (land tax and/or rent), environmental tax and tax on real estate other than a land plot in the territories of active hostilities or in the temporarily occupied territories of Ukraine.

List No. 309, among other things, divides the territories into those where active hostilities are taking place and those where hostilities are possible.

However, the analysis of the provisions of List No. 309 shows that the territories located in the immediate vicinity of the combat zone and systematically affected by shelling and, accordingly, where there are significant difficulties in conducting planned economic activities due to security risks and destruction, do not belong to the territories of active hostilities to which tax benefits apply. And the reason is as follows.

The Ministry of Reintegration regularly updates the List No. 309. However, it should be noted that the Order of the Ministry of Reintegration No. 199 of July 13, 2023 included a new paragraph 3 to the List No. 309, which concerns the territories of active hostilities where state electronic information resources operate. In accordance with this paragraph 3, such territories as Kherson, Kharkiv, Zaporizhzhia, Mykolaiv, Donetsk (Kramatorsk district), etc. were excluded from the list of territories where active hostilities are taking place. In other words, if registers are kept in a certain area of active hostilities, then, according to the tax authorities, it loses the possibility of applying the benefit under the Tax Code.

According to the European Business Association, the approach to the formation of the list of territories of active hostilities should be uniform for all territories. Moreover, it is strange that the above-mentioned territories are defined as those where no hostilities are taking place, given the consequences of armed aggression in these regions and significant difficulties in the conduct of business by companies. Therefore, it is important to change this situation and still include these territories in the list (by moving them to paragraph 2 of the List No. 309 as a separate subparagraph).

Special attention should be paid to the issue of stopping navigation on the Dnipro River and in the Black Sea and closing the seaports of Berdiansk, Mariupol, Skadovsk and Kherson. For example, navigation on the Dnipro River was significantly affected after the Russian occupation forces blew up the dam of the Kakhovka hydroelectric power plant on June 6, 2023. The suspension of river navigation, in turn, led to the suspension of the main activities of river ports on the Dnipro River, even those that are not located in areas where hostilities are ongoing, have been ongoing or may be ongoing.

Therefore, business representatives note that state support for business entities operating in the field of inland waterway (river) transport is an important issue in the context of preserving the country's transport infrastructure and restoring the Dnipro River as the country's main shipping artery.

At the same time, even in the absence of inland waterway navigation, the company still has to pay land tax (note that the company does not receive any income). Therefore, the business proposes to reduce the tax on inland waterway land as well.

The European Business Association has already addressed the Vice Prime Minister for Reconstruction of Ukraine - Minister of Community Development, Territories and Infrastructure, Vice Prime Minister of Ukraine - Minister for Reintegration of the Temporarily Occupied Territories of Ukraine, Minister of Finance of Ukraine, Chairman of the Parliamentary Committee on Finance, Taxation and Customs Policy with relevant proposals and sincerely hopes that the business proposals for support in the territories where hostilities are taking place will be supported.