Personal income taxation received from the sale of agricultural products during the martial law

Ministry of Finance of Ukraine has published an explanation on the personal income taxation received from the sale of own agricultural products during the martial law.

 (https://mof.gov.ua/uk/news/roziasnennia_shchodo_opodatkuvannia_dokhodiv_fizichnikh_osib_
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Personal income taxation is regulated by Section IV "Personal Income Tax" of the Tax Code of Ukraine (hereinafter – Code); the taxpayer is a resident individual who receives income from the source of origin in Ukraine according to Sub-paragraph 162.1.1 Paragraph 162.1 Article 162 of the Code.

List of income included in the total monthly (annual) taxable taxpayer’s income is defined in Article 164 of the Code, in particular, includes other income than those specified in Article 165 of the Code (Sub-paragraph 164.2.20 Paragraph 164.2 Article 164 of the Code).

Such income is also subject to the military levy (Sub-paragraph 1.2 Paragraph 16¹ Sub-section 10 "Other transitional provisions" of Section XX "Transitional provisions" of the Code).

Sub-paragraph 165.1.24 Paragraph 165.1 Article 165 of the Code stipulates that the total monthly (annual) taxable taxpayer’s income does not include income from the sale of own agricultural products grown, fattened, caught, harvested, manufactured, produced, processed and / or processed directly by an individual on land plots, for:

horticulture and / or for construction and maintenance of residential buildings, outbuildings and structures (homesteads) and / or for individual cottage construction;

personal peasant economy and / or land shares (shares) allocated in kind (on the ground).

In case of sale of own agricultural products (except for livestock products), income received from such sales is not taxable income, if its total amount for a year does not exceed 12 times the minimum wage established by law on January 1 of the reporting (tax) year. If amount of income exceeds the specified amount, the taxpayer must reflect such excess amount in the total monthly (annual) taxable income for the reporting year and submit annual property and income tax declaration according to the Code and pay tax on the amount of such excess.

Selling agricultural products (except for livestock products), its owner must submit to the tax agent a copy of certificate of availability of land plots specified in Clauses 2 – 3 of this Sub-paragraph. Original certificate is kept by the owner of agricultural products during the statute of limitations from the date of expiration of such certificate. Certificate is issued by the village, settlement, city council or council of united territorial communities, established according to the law and the long-term plan for formation of community territories at the taxpayer’s tax address (residence) within five working days from the date of receipt by relevant council of a written application for issuance of such certificate.

Certificate form is established in order determined by Article 46 of the Code for tax declarations.

Selling own livestock products of Groups 1-5, 15, 16 and 41 of the Ukrainian classification of the FEA products, income received from such sales is not taxable income, if its total amount for a year does not exceed 50 times the minimum wage established by the law on January 1 of the reporting (tax) year. Such individuals sell these products without obtaining certificate of land ownership.

If amount of income exceeds amount specified in this Sub-paragraph, an individual must provide the supervisory authority with a certificate of self-cultivation, breeding, fattening livestock products issued in any form by the village, town, city council or council of united territorial communities, established according to the law and the long-term plan for formation of communities, at the place of tax address (residence) of the owner of livestock products. If certificate confirms cultivation of sold livestock products directly by the taxpayer, income in excess of 50 times the minimum wage established by the law on January 1 of the reporting (tax) year is subject to taxation.

If such taxpayer has not confirmed the independent cultivation, breeding, fattening of livestock products, income from the sale of which he / she received, such income is subject to taxation on general grounds.

At the same time, the Law of Ukraine № 2142-IX as of 24.03.2022 "On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine to improve legislation during the martial law" (hereinafter – Law № 2142) to facilitate the purchase of agricultural products from the population for a period of the martial law and in order to reduce amount of tax reporting, the Sub-section 1 "Personal income taxation peculiarities" of Section XX of the Code is amended with Paragraph 23.

According to provisions of this Paragraph temporarily, starting from April 1, 2022 and during the martial law, imposed by Decree of the President of Ukraine № 64/2022 as of 24.02.2022 "On the martial law in Ukraine", approved by the Law of Ukraine № 2102-IX as of 24.02.2022 "On approval of Decree of the President of Ukraine "On the imposition of martial law in Ukraine", provisions of Sub-paragraph 165.1.24 of Paragraph 165.1 Article 165 of the Code are applied taking into account the following peculiarities:

income received from the sale by a taxpayer to a person who, according to the Code, has the tax agent’s status, own agricultural products grown, fattened, caught, collected, manufactured, produced, processed and / or processed directly by an individual (hereinafter – own agricultural products) is finally taxed by such tax agent at the time of their accrual (payment);

tax agents in Annex 4DF "Information on the amount of accrued income, withheld and paid personal income tax and military levy" (hereinafter – Annex 4DF) to the Tax calculation of amount of income accrued (paid) in favor of taxpayers – individuals and amounts of tax withheld from them, as well as amounts of accrued single contribution (hereinafter – Calculation) submission of which is provided for in Sub-paragraph "b" of Paragraph 176.2 Article 176 of the Code, reflect the total amount of accrued (paid) in the reporting tax period income received by individuals from sales to a person who has the status of tax agent of agricultural products and the total amount of tax withheld from them. Herewith, the Calculation (Annex 4DF) does not contain information on the amount of a separate payment, amount of tax accrued on it, as well as information on an individual taxpayer who received income from the sales of agricultural products to a person who has the tax agent’s status.

As follows, in case of failure of an individual taxpayer to provide a copy of certificate of land ownership and / or certificate of self-cultivation, breeding, fattening livestock products or identity documents (passport and taxpayer’s registration card number), the tax agents from April 1, 2022 and during a period of the martial law in the accrual (payment) of income from the sale of own agricultural products in favor of individuals are required to accrue, withhold and pay (transfer) to the budget personal income tax on the entire amount of income, taking into account requirements of Paragraph 23 of Sub-section 1 "Personal income taxation peculiarities" of Section XX of the Code, ie without taking into account the non-taxable amounts of such income established by Clauses 4 and / or 7 of Sub-paragraph 165.1.24 Paragraph 165.1 Article 165 of the Code.