On 3rd of June, 2020 Vladimir Zelensky signed the Law of Ukraine “On Amendments to the Law of Ukraine” On the collection and accounting of a Unified Contribution for Compulsory State Social Insurance”to eliminate discrimination in the circle of payers” dated on 05/13/2020, No. 592-IX. Since farmers are also taxpayers, we will consider how the mentioned law will affect them.
The need for introduction
Despite the obvious mistakenness of such a position, earlier the legislation actually distinguished between an individual entrepreneur and a person engaged in independent professional activities, as two separate taxpayers. It resulted in an excessive and unreasonable tax burden.
Another problem – working pensioners also paid a single social contribution while implementing the independent professional activities, but not being an individual entrepreneur.
Also, the issue becomes more complicated if such a person is employed, because tax obligations arise already with the employer.
New taxation of farmers who pay unified social tax
- Members of farming enterprises will not pay unified social tax (UST) if they receive a pension for years of service (old-age pension has been established before).
- Members of farming enterprises pay UST in the amount of the minimum insurance premium (now it is 1039.06 UAH), if they did not make a profit in the reporting quarter or in its separate month.
- Members of farming enterprises may not pay UST if the employer has already paid for them.
- Members of farming enterprises can write off UST arrears accrued from January 1, 2017, if they file an application within 90 calendar days from the entry into force of the law (that means, there is a time until September 1, 2020). In this case, the tax authority will conduct a desk audit and reject if they find profits for the inspected period, or make sure that the arrears have already been paid / recovered in full, only the unpaid / unrecovered arrears will be written off.
- These rules do not apply to members of farming enterprises that are subject to insurance on other grounds (it is not completely clear what the legislator meant, possibly it concerns private pension funds).
When will it work?
In the final provisions it is indicated that this law will come into force on 1st January 2021, except for the clause regarding the writing off UST arrears – it has already entered into force its since June 3, 2020.
And here we have problems – until September all the arrears will be written off to farmers, but the new arrears are being charged until January, since the law has not yet entered into force. The tax authorities will be asked to find debtors for the UST – they will come themselves, although earlier.
So, ether incidentally or intentionally, but there is a three-month window in which farmers will again be charged with arrears. We can suppose a wave of judicial disputes in the end of 2020. At the same time, we cannot deny the positive changes in the legislation for the longer term.