Despite the hot summer season a portion of legislative novelties arrived from Parliament and posed lots of questions for consideration. Recently, the President of Ukraine signed the Law On Amendments to the Tax Code of Ukraine and Certain Laws of Ukraine on Encouraging Establishment and Operation of Family Farms.
Ihor Bielitskyi, associate at Evris, gives his view on encouraging establishment and operation of family farms and the impact of this initiative on the related industry development, exclusively for The Ukrainian Journal of Business Law.
Adoption of Law No. 2497-VIII, of 10 July 2018, provides more opportunities for farmers in terms of choosing a taxation system for their activities.
This law has expanded the concept of agricultural producers by referring them to individual entrepreneurs, which allows the heads of family farms to become payers of the single tax (ST), Group 4. From now on, the heads of farms will face a choice on whether to pay tax on income as before, or on a normative-monetary valuation of the land plot. In this case, each farmer will be able to choose a more favorable taxation system specifically for him or her.
An additional advantage of Group 4 is the absence of a limitation on annual income for the purpose of remaining an ST payer. At the same time, if the farm’s income for the last 12 months exceeds the sum of UAH 1 million, the head of the farm is obliged to register as a VAT payer, which will increase the administrative and tax burden on him.
Farmers can also be motivated by the lawmaker’s decision to pay within 10 years at the expense of the state up to 90% of the single social contribution for the head and members of the farm.
Persons who decide to establish a farm for the purpose of transition to Group 4 of the ST will, by the end of the month in which the state registration is carried out, submit an application to the controlling body about the election of the respective group of ST payers. Within 20 days of submission of the application, the heads of farms will need to submit a package of documents provided for in clause 298.8.1. of Article 298 of the Tax Code of Ukraine.
Existing farms will have to wait until 20 February to make the transition to Group 4. It is necessary to submit a package of documents provided for in paragraph 298.8.1. of Article 298 of the Tax Code by that date.