Application peculiarities of norms determined by Paragraph 266.2 Article 266 of the Tax Code of Ukraine regarding tax on immovable property other than land plot...

Application peculiarities of norms determined by Paragraph 266.2 Article 266 of the Tax Code of Ukraine regarding tax on immovable property other than land plot: application of norm of sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266

Sub-paragraph 266.1.1 Paragraph 266.1 Article 266 of the Tax Code of Ukraine (hereinafter – Code) stipulates that payers of tax on immovable property other than land plot (hereinafter – Tax) are individuals and legal entities, including non-residents, who are owners of residential objects and/or non-residential real estate.

Sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code stipulates that buildings and structures of agricultural producers (legal entities and individuals) classified as "Non-residential agricultural buildings" (code 1271) of Classification of buildings and structures of the National Classifier 018:2023, which are used for their intended purpose in economic activity of entities, are not subject to Taxation and do not loan their owners for rent, lease, loan.

Provisions of Sub-paragraph 14.1.235 Paragraph 14.1 Article 14 of the Code define that agricultural producer is legal entity regardless of its organizational and legal form or individual-entrepreneur who is involved in production of agricultural products and/or breeding, growing and catching fish in inland water bodies (lakes, ponds and reservoirs) and processing at its own or leased facilities, including its own produced raw materials on the supplier’s conditions and carries out operations for its supply.

Agricultural products (agricultural goods) are products/goods falling under definition of Groups 1 - 24 of the Ukrainian classification of the foreign activity products, if at the same time such goods (products) are grown, fattened, caught, collected, manufactured, produced, processed directly by the manufacturer of these goods (products), as well as products of processing of these goods (products), if they were purchased or produced at own or leased facilities (areas) for sale, processing or domestic consumption (Sub-paragraph 14.1.234 Paragraph 14.1 Article 14 of the Code).

Therefore, for a right to apply specified norm of the Code, the Tax payer must simultaneously meet the following conditions:

must be agricultural producer;

must be owner of buildings and structures assigned to the class "Non-residential agricultural buildings" (code 1271) of the Classifier of buildings and structures of the National Classifier 018:2023, approved by Order of the Ministry of Economy of Ukraine № 3573 as of 16.05.2023 (hereinafter – Classifier);

buildings and structures must be used for their intended purpose in the payer’s economic activity as agricultural producer;

buildings and structures are not rented, leased, or loaned.

Practice of tax administration shows the need to provide clarifications, taking into account some circumstances that arise for tax payers.

1. In 2023, the enterprise was agricultural commodity producer and was subject to sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code, however, since 2024, it has suspended activity of growing agricultural crops, but enterprise has remained in ownership of all real estate objects, which were used by him to carry out activities as agricultural producer.

Taking into account the provisions of Sub-paragraph 14.1.235 Paragraph 14.1 Article 14 of the Code, conduction of economic activities by agricultural producer, in particular, supply, production and processing of agricultural products, is one of obligatory conditions for applying to objects provisions of sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code.

If enterprise has suspended activity of growing agricultural crops, then in this case enterprise has no grounds for applying sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code.

2. Enterprise owns elevator complex, which it plans to use to provide warehousing services to third-party organizations.

According to the Classifier, agricultural silos and warehouse buildings used for agriculture belong to code 1271 "Non-residential agricultural buildings".

At the same time, in case that enterprise uses elevator to provide storage services to third-party organizations, the elevator is not subject to sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code, since in this case the elevator is not used for its purpose in agricultural activities of enterprise itself within the meaning of Sub-paragraph 14.1 .235 Paragraph 14.1 Article 14 of the Code.

3. Enterprise is agricultural producer, owns real estate objects assigned to class 1271 "Non-residential agricultural buildings" of the Classifier. At the same time, part of real estate is leased. Question arises as to whether enterprise has a right to apply sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code in relation to areas of real estate objects that were not leased.

Provision of real estate objects for rent, leasing, or loan deprives enterprise of a right to apply sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code in the process of determining tax liability.

Exclusion from the list of taxation objects, provided for by sub-paragraph "g" of Sub-paragraph 266.2.2 Paragraph 266.2 Article 266 of the Code, concerns buildings and structures, not their parts. Therefore, if enterprise leases part of area of ​​ objects, then deprivation of a right to use the specified norm applies to the entire area of ​​buildings and structures, part of which is leased.