Due to the fact that agriculture is one of the leading sectors of the Ukrainian economy, the highest government bodies pay considerable attention to the issue of regulating taxation for agricultural producers. At the same time, the taxation rules for agricultural enterprises change almost every year. The state, at certain times, initially attempts to stimulate the development of the agribusiness by introducing corresponding tax benefits for farmers. Then, the government comes to the conclusion that the agribusiness contributes too little to the budget’s tax revenues, increasing the tax burden on agricultural enterprises. For example, a special VAT taxation regime for agricultural activities was initially introduced, but later this regime was canceled, and agricultural enterprises began paying VAT under the general system.
The taxation system for entities engaged in agriculture is very complex and has many nuances. As an example, according to the general rule, agricultural enterprises are taxpayers of corporate income tax. However, agricultural service cooperatives can be non-profit organizations. Also, agricultural enterprises may process land based on lease agreements, where the lessors are so-called “shareholders.” In this case, the tenants pay rent to the lessor based on the relevant agreement. However, it is not uncommon for agricultural enterprises to process state or municipal land. In such cases, depending on the type of land use, farmers either pay land tax or also pay rent. There are also certain categories of land plots that are exempt from land tax.
Furthermore, agricultural producers, under certain circumstances, may operate under the simplified taxation, accounting, and reporting system—so-called “Group 4″—paying a single tax. The Tax Code of Ukraine also establishes cases where agricultural producers who are single tax payers must switch to paying taxes and fees under the general taxation system.
Considering the complexity and constant changes in the taxation system for agricultural enterprises, even an experienced accountant may not be able to independently navigate all the legal nuances of taxation, which can lead to violations of tax legislation and, consequently, to the recalculation of tax liabilities and the imposition of fines.
Given the above circumstances, to protect the interests of their business, it is advisable for farmers to use legal services from lawyers who specialize in the taxation of agricultural enterprises.
The team at WinnerLex Law Firm has brought together the best lawyers who provide comprehensive legal support for agricultural producers and processing enterprises across various sectors of the agribusiness complex, including taxation matters. Our lawyers understand how business is conducted in the agricultural sector, are familiar with the peculiarities of taxation for agricultural enterprises, and therefore offer the best solutions for legal issues.
TAX CONSULTING FOR AGRICULTURAL ENTERPRISES includes a wide range of services, among which the following can be highlighted:
- Tax consulting, identification, and minimization of potential legal risks related to tax collection;
- Tax planning for agribusiness activities;
- Legal audit (Due Diligence) of agricultural enterprises in tax matters;
- Selection of optimal tax-efficient options for conducting transactions involving the acquisition and disposal of assets (land and other real estate, agricultural machinery, corporate rights of agricultural enterprises);
- Interaction with tax authorities, including preparing responses to inquiries from controlling authorities, supporting tax audits of agricultural enterprises, and seeking individual tax consultations;
- Resolution of tax disputes between farmers and tax authorities in administrative and judicial procedures.
Practice experience: 19 years
Specialization: litigation support, tax, customs and antitrust practices, agricultural law, IT and M&A
Practice experience: 21 years Specialization: support of economic, civil, labor and administrative disputes, energy
Practice experience: 11 years Specialization: tax, customs and corporate disputes, support of inspections, contractual activities
Practice experience: 6 years
Specialisation: business and civil law, tax and customs practice, corporate law, registration and reorganisation of business
Practice experience: 11 years Specialization: support of economic, civil, labor and administrative disputes, inspections
If an agricultural enterprise has certain doubts regarding the interpretation of tax legislation, it has the right to request an individual tax consultation from the controlling authority—an explanation regarding the practical application of specific provisions of tax law. In this case, the taxpayer who acted in accordance with the individual tax consultation is exempt from liability for violating the requirements of tax legislation. It should be noted that such a consultation must be registered in the unified register of individual tax consultations.
In accordance with the Code of Administrative Court Procedure of Ukraine, a six-month period is established for filing a claim with the administrative court, which is calculated from the day the person became aware, or should have become aware, of the violation of their rights. However, if the taxpayer has used the right to administrative (pre-trial) appeal, the period for filing a claim with the court is three months, calculated from the day the claimant receives the decision on the results of the consideration of their complaint regarding the actions, inaction, or decisions of the authorities.
Land tax is not paid for:
- Land plots of agricultural enterprises of all forms of ownership and farms (peasant farms) occupied by young orchards, berry plantations, and vineyards until they enter the fruit-bearing period, as well as hybrid plantings, gene pool collections, and nurseries of perennial fruit plantings;
- Agricultural land that is under temporary conservation or in the process of agricultural development;
- Agricultural lands in the radioactive contaminated zones, as defined by law, that were affected by radioactive contamination due to the Chernobyl disaster, and chemically contaminated agricultural lands where restrictions on agricultural activities have been imposed.
Agricultural service cooperatives that provide services exclusively to their members—agricultural producers—and do not aim to make a profit may have the status of non-profit organizations, provided that they simultaneously:
- Are formed and registered in accordance with the law that governs the activities of the relevant non-profit organization;
- Their founding documents prohibit the distribution of the income (profits) or any part thereof among members or employees (except for payment for their work and the accrual of the unified social contribution), members of governing bodies, and other related persons;
- Their founding documents provide for the transfer of assets to one or more non-profit agricultural cooperatives, or for the allocation of assets to the state budget in the event of the dissolution of the agricultural cooperative.
To obtain the status of a non-profit organization, the agricultural cooperative must be registered in the Register of Non-Profit Institutions and Organizations.
Agricultural enterprises, regardless of their organizational and legal form, can be single tax payers, provided that they are producers of goods and the share of agricultural production in the previous tax (reporting) year equals or exceeds 75 percent of the total production volume.
A taxpayer who receives a request from the controlling authority that does not comply with the requirements of the Tax Code of Ukraine is exempt from the obligation to respond to such an improper request.
A taxpayer may appeal the relevant actions, inactions, and decisions administratively to a higher controlling authority or in court. In this case, after completing the administrative appeal process, which is a pre-trial method of dispute resolution, the taxpayer may file a lawsuit in court.
The sale of a land plot by an individual is not taxed if all the following three conditions are met simultaneously:
- If the taxpayer – the seller of the land plot has not carried out transactions for the disposal of other real estate objects (including houses, apartments, other buildings) during the reporting tax year;
- If the area of the land plot does not exceed the free transfer norm specified by the Land Code of Ukraine depending on its purpose;
- If the land plot has been owned by the taxpayer for more than three years (except in the case of obtaining the land plot through inheritance).
In all other cases, the sale of a land plot by an individual is subject to income tax.
