Regarding certain matters of determining the minimum tax liability

Clarifications set out in this notification are devoted to specific matters of crediting amounts of paid taxes and levies in the process of calculating the minimum tax liability, taking into account position of the Ministry of Finance of Ukraine (letter № 11230-09-62/4712 as of 15.02.2024, hereinafter – Letter) regarding crediting of amount of paid single tax of Group 4 in the IV quarter of 2022 for the IV quarter of 2022 determining the minimum tax liability for 2023.

Questions and answers has been prepared based on numerous requests from agricultural producers.

1. Does Letter refer exclusively to overpayments that arose as a result of clarification of tax obligations for 2022-2023 according to the Law of Ukraine № 3050-IX as of 11.04.2023 "On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine regarding exemption from payment of environmental tax, land tax and tax on immovable property other than land plot for destroyed or damaged immovable property" (hereinafter – Law № 3050)?

Specified letter generally refers to the concept of crediting amounts of paid taxes within the limits of accrued amounts in the process of calculating the minimum tax liability for relevant reporting year.

2. Please let know if, in 2023, clarification of the single tax of Group IV for 2022 was submitted for a reduction in connection with application of benefit for a period of occupation from 01.03.2022 to 12.09.2022. We understand that this amount of reduction is deducted from the amount of paid single tax, which is indicated in calculation of the minimum tax liability line 02.1 and submit clarification of the minimum tax liability (that is, reduction leads to overpayment for 2022)? So, does the payer have a right to include this overpayment in the minimum tax liability in future periods?

Minimum tax liability is not tax, but amount that increases the single tax liability due to positive value of calculation of the minimum tax liability. According to norms of the Tax Code of Ukraine (hereinafter – Code), overpayment cannot be taken into account in calculation of the income tax in reporting period. However, accruing single tax and repaying (paying) it at the expense of overpaid amount of the single tax liabilities, such amounts may be taken into account in the process of calculating tax liability in the future periods within the limits of accrued amounts.

3. Where can the payer view debits from the payer's integrated card? E-cabinet? Payments to the budget? Is column paid to the budget? How about the personal income tax and military levy? Are returns from the budget reflected in case of submission of clarifications?

In the electronic cabinet, in section "Payments to the budget", the flow of funds on personal account is reflected. In case of submitting clarifying declaration, amounts to be reduced are reflected in the payer's cabinet in the accrued column with a "-" sign.

4. Is it necessary now to submit clarifying declarations and annexes of the minimum tax liability with a recalculation of taxes/levies included in the minimum tax liability for previous periods of 2022 and 2023? Do we understand correctly that in case of any increase/decrease in taxes on the integrated payer card, it is necessary to clarify the minimum tax liability annexes? During which periods did such a move to integrated payer card take place?

Taxpayer independently determines the need to submit clarifying declarations if in the future tax periods, if discovers errors contained in previously submitted tax declaration, taking into account statute of limitations defined by Article 102 of the Code.

Given the fact that annexes to declaration are integral part of declaration, in case of errors discovered in previous periods that affected the underestimation of value of the minimum tax liability and, accordingly, payable single tax, the taxpayer can exercise right according to Article 50 of the Code and specify tax obligations. At the same time, if such circumstances are discovered, amount of monetary obligations will be determined by such controlling authority independently (Paragraph 54.3 Article 54 of the Code).

5. Rent payment for state and communal land for November 2023 should be on January 2, 2024. In what period can 20% of the minimum tax liability be credited in 2023 or 2024?

In this situation, rent for state and communal land is paid on January 2, 2024 (for November 2023) due to the postponement of payment deadline. Therefore, such amounts of rent for state and communal land within 20% of the accrued amount can be taken into account in the process of calculating the minimum tax liability for 2024.

6. Do we understand correctly that if legal entity is the single tax payer of Group IV that has exemption for the single tax and minimum tax liability for a period, for example, March – September 2022, the legal entity does NOT calculate the minimum tax liability, but at the same time, all taxes paid during 2022 can be taken into account for the reduction? How to link with the integrated payer card? Periods?

In this situation, calculating the minimum tax liability for relevant reporting period, it is possible to take into account all paid, within the limits of accrued amounts, relevant taxes provided for by the Code.

Amount of paid taxes and levies does not include amounts of taxes, levies and payments that were erroneously and/or excessively paid in the tax (reporting) year.

7. In November 2023, we won auction for a right to lease land plot for 7 years, according to the contract terms, annual amount of rent must be paid in advance. In reduction of the minimum tax liability for 2023, only amounts of rent for November will be taken into account, and the rest of funds will not be taken into account either in 2023 or in 2024?

In this situation, rent, according to the terms of land lease agreement, was paid in November 2023 in advance for a total of 7 years, and therefore the taxpayer will be required to submit clarifying calculation of the land rent for 2023 and reflect calculation of rent amounts for November 2023 and January 2023 and subsequently declare obligations for this payment within 7 years. As a result of such declaration, the payer will have monthly tax obligations from this payment.

Therefore, in the specified situation and taking into account postponement of the payment deadline of tax liabilities for November 2023 to January 2, 2024, amounts of rent paid in November 2023 can be taken into account in the future in the process of calculating tax liability starting from the reporting period 2024 and in the future periods within the limits of accrued tax amounts for the corresponding reporting period.

8. Is it true that advances were paid in the previous year, in this case in 2021, the agricultural producer, according to requirements of current legislation, has a legal right to credit the entire amount of taxes paid in 2021, which at the beginning of 2022 were counted as paid advances? Will there be a connection with the integrated payer card?

Amounts of taxes paid in 2021 by the agricultural producer, according to requirements of current legislation, will be counted as a reduction of the total minimum tax liability.

9. Does the agricultural producer have a right to take into account in reduction of the minimum tax liability for 2022 amount of the single tax liability of Group IV for the IV quarter of 2022, paid by the agricultural producer within 30 calendar days after the end of reporting period (until January 30, 2023), for example January 16, 2023?

In this case, the agricultural producer does not have a right to take into account reduction of the minimum tax liability for 2022 (Annex 3 of the Single tax payer's declaration for 2023), but may take into account the specified amounts in the process of calculating the minimum tax liability for 2023 within the limits of accrued amounts (Annex 3 of the Single tax payer's declaration for 2024).

10. Does the agricultural producer have a right to take into account in reduction of the minimum tax liability for 2022 amount of the single tax liability of Group IV for the IV quarter of 2021, paid by the agricultural producer within 30 calendar days after the end of reporting period (until January 30, 2022), for example January 16, 2022?

In this case, the agricultural producer has a right to take into account amount of paid single tax within the limits of accrued amounts in reduction of the minimum tax liability for 2022 (Annex 3 of the Single tax payer's declaration for 2023).

11. In which reporting period does the agricultural producer have a right to take into account in reducing the minimum tax liability (for 2022 or for 2023) amount of the single tax liability of Group IV for the IV quarter of 2022, paid by the agricultural producer, for example on December 14, 2022?

In this case, the agricultural producer has a right to take into account the specified amounts in reduction of the minimum tax liability for 2023 (Annex 3 of the Single tax payer's declaration for 2024), due to the fact that payment for the IV quarter of 2022, although it took place on December 14, 2022, however, the payment deadline of such obligations according to requirements of the Code falls on 2023.

12. Agricultural producer – legal entity in Group IV of the single tax reflected annual amount of rent, including monthly tax obligation in the Land tax declaration (land tax and/or rent for land plots of state or communal property) for 2022. Amount of rent for December 2022 in the amount of 4054.00 UAH was paid to the budget on January 9, 2023. Will this amount be taken into account calculating the minimum tax liability for 2022 and in what amount?

Amount of rent paid for December 2022 in January 2023 in the amount of accrued amount of 4054 UAH can be taken into account calculating the minimum tax liability only for 2023.

13. Are the amounts of taxes paid by the taxpayer according to tax notifications-decisions based on the results of tax audits taken into account in reduction of the minimum tax liability? In what periods?

Legislation does not specify inclusion of tax amounts, including fines, calculated according to tax notifications-decisions based on the results of tax audits, in reduction of the minimum tax liability.

14. In 2023, payment term for land rent for November was reflected in the accrual to the payer's integrated card on January 2, 2024, and payment was made by the deadline of December 30, 2023. Payment is not credited either in 2023 (overpayment) or in 2024 (paid in 2023). When to reduce the minimum tax liability of rent 20%?

In this case, the agricultural producer does not have a right to take into account amount of land rent payment for November 2023 due on December 30, 2023, in the reduction of tax rate2023, but may take into account the specified amounts in the process of calculating tax rate 2024 (Annex 3 of the Single tax payer's declaration for 2024).

15. Farm received benefits regarding taxation of land plots from the rural military administration in 2022 – 2024 (land rent, single tax of Group IV, minimum tax liability). According to these decisions, the farm did not declare obligations to pay single tax of Group IV and minimum tax liability. In 2022, during the occupation, nothing was grown, in 2023, after independent survey of fields, 30 hectares were sown, grown products were sold and reflected in calculation of specific gravity. Now the Tax Service demands to write a letter to the military administration about cancellation of benefits for those land plots that were under cultivation, and to calculate single tax of Group IV and the minimum tax liability for 2023-2024. Otherwise, the single tax payer’s status for 2023 will be canceled and status for 2024 will not be granted. It is worth noting that the farm at the registration place from 01.05.2023 is located in the Territory of active hostilities, where state electronic information resources function.

Please, let know whether actions of Tax Service are legal? Does anyone have this situation? What are the actions?

If circumstances have arisen for the taxpayer to be unable to fulfill tax obligations, in particular with regard to submission of reports specified in Sub-paragraph 4 Paragraph 291.4 Article 291 of the Code, such taxpayer according to Sub-paragraph 69.1 Paragraph 69 Sub-section 10 Section XX "Transitional provisions" of the Code and Order of the Ministry of Finance of Ukraine № 225 as of 29.07.2022 "On approval of Procedure for confirming possibility or impossibility of the taxpayer's performance of obligations specified in Sub-paragraph 69.1 Paragraph 69 Sub-section 10 Section XX "Transitional Provisions" of the Tax Code of Ukraine and list of supporting documents", submits application and relevant documents (copies of documents) about the lack of such opportunity. After submitting such documents and making decision by the controlling authority regarding possibility or impossibility of timely fulfillment of tax obligation by the tax payer, such payer is obliged to submit report not later than 60 calendar days from the first day of month following the month in which such opportunities are renewed, determined by Sub-paragraph 4 Paragraph 291.4 Article 291 of the Code, taking into account requirements of Sub-paragraph 298.8.4 Paragraph 298.8 Article 298 and Sub-paragraph 10.1 Paragraph 10 Sub-section 8 Section XX "Transitional provisions" of the Code.

Therefore, if the taxpayer has regained ability to fulfill tax obligations, the taxpayer, in order to comply with requirements of Sub-paragraph 69.1 Paragraph 69 Sub-section 10 Section XX "Transitional provisions" of the Code, is obliged to submit the single tax payer’s declaration of Group IV to confirm the taxpayer’s status of Group IV for 2023 not later than 60 calendar days from the first day of month following the month of renewal of such opportunities. Otherwise, the payer does not have a right to acquire the single tax payer’s status of Group IV for 2023.

16. Is it necessary to submit annex to the minimum tax liability to the income tax declaration, if land is located in temporarily occupied territory or territory of active hostilities?

Yes, it is necessary. At the same time, taxation objects are declared – cadastral numbers, areas of land plots and tax liabilities are not calculated from the minimum tax liability (declaration with dashes or "0").

17. In 2023, part of the agricultural land is in zone of possible hostilities and part is in zone of active hostilities, after deoccupation in October 2022. According to decision of military administration, the land tax rate for all types of land plots in 2023 will be 0, and decision was also made to grant a 100% benefit to all land tax payers. Individual applications for benefits were not submitted. Will the minimum tax liability be charged?

Total minimum tax liability for land plots (land shares (parts)) located in territories of active hostilities or in territories of Ukraine temporarily occupied by the russian federation, which are included in the List of territories, is not subject to calculation and payment, as the taxpayers in this period:

had a right not to accrue and not pay land tax on the basis of Sub-paragraph 69.14 Paragraph 69 Sub-section 10 Section XX of the Code for income tax payers and single tax payers of Group III;

had a right not to accrue and not pay the single tax of Group IV on the basis of Sub-paragraph 69.33 Paragraph 69 Sub-section 10 Section XX of the Code for the single tax payers of Group IV.

At the same time, taxation objects are declared – cadastral numbers, areas of land plots and tax liabilities are not calculated from the minimum tax liability (declaration with dashes or "0").

18. Please clarify whether benefit from paying the single tax of Group IV, the minimum tax liability, rent for land applies to the farm, if, according to the List of territories № 309, they are classified as territories that are in territory of active hostilities where state electronic information resources function.

Sub-paragraph 69.33 Paragraph 69 Sub-section 10 Section XX of the Code stipulates that taking into account norms of Resolution № 485 as of 30.04.2024 "On amendments to Paragraph 1 of Resolution № 1364 of the Cabinet of Ministers of Ukraine as of 06.12.2022" for taxation facilities located on the territory of active hostilities where state electronic information resources function, the single tax of Group IV is not accrued and paid, starting from 01.05.2024 until the date of termination of active hostilities in such territories.