For the period of martial law, local self-government bodies have the right to establish local taxes/fees and their tax exemptions without applying any procedures stipulated by the Law of Ukraine "On the Principles of State Regulatory Policy in Economic Activity". Ella Romanenko, Deputy Head of the Southern Interregional Department of the State Regulatory Service of Ukraine, told this during an information session for the specialists of Mykolaiv Oblast municipalities.
In her words, in accordance with Article 40 of the Law of Ukraine "On the Principles of State Regulatory Policy in Economic Activity", under martial law, regulatory activities are subject to restrictions on human and civil rights and freedoms, set under martial law in accordance with the Constitution of Ukraine and the Law of Ukraine "On the Legal Regime of Martial Law".
Article 8 of the Law of Ukraine "On the Legal Regime of Martial Law" enables local military administrations and councils to make decisions important to the municipality quickly and without delay. For example, on the restriction of alcohol sales, hazardous waste management, use of the civil protection facility fund, capacity utilisation of enterprises, institutions or organisations, etc.
And part 10 of Article 9 of this Law allows not to apply the procedures stipulated by the Law on Regulatory Policy to the acts of local self-government bodies during the period of martial law.
"But I would like to warn against applying this provision of Article 9 to draft decisions of local self-government bodies. The State Regulatory Service stands by the following position: all draft decisions that are subject to the Law on Regulatory Policy must be adopted according to this law. And exceptions, such as making decisions to set rates of local taxes, fees, and privileges for their payment, are established exclusively by laws," said Ella Romanenko.
The speaker recommended to local councils that had adopted such decisions in violation of the procedure before imposing martial law to include documents on the local taxes and fees approval in the next annual plan for drafting regulatory acts in December 2023 and to adopt them under the procedure stipulated by law from the beginning of 2024.
"The legislator has provided such a temporary opportunity for councils to make prompt decisions, but nothing has changed in the principle of stability underlying tax legislation in Ukraine. It provides that no changes to any elements of taxes and fees may be introduced later than six months before the start of the new budget period when the new rules and rates are to be applied," the speaker emphasised.
In other words, the decision to approve local taxes and fees is to be made no later than 15 July in accordance with the TCU, and even before 1 July in line with the principle of stability. At the same time, it is mandatory to follow the regulatory procedure in terms of consulting with stakeholders and obtaining an opinion from the State Regulatory Service.
"Why does it matter? I had a case in my practice when one council cancelled almost all decisions on setting local taxes and fees adopted since 2015. And the reason is that they "missed" one procedure stage - approval from the State Regulatory Service," she explained.
That is, if the council adopts a regulatory act and it is a draft decision of the session, a mandatory stage in this procedure is to send a package of documents to the State Regulatory Service of Ukraine for comments and suggestions.
"Although the local council's decision is valid even in the event of a procedure violation, it can be appealed in court. If there is a business entity that believes its legitimate interests have been violated due to the council's failure to comply with regulatory procedures, and the fact of the procedure violation is proved, the council faces cancellation of the decision, as well as a significant impact on the local budget related to the execution of court decisions," the speaker said.
She also advised to avoid negligence with regard to existing regulations and, whenever possible (if the municipality is relatively secure), to comply with the requirements of the Law on Regulatory Policy in a systematic and legal manner, as well as to consult the SRS specialists for relevant advice.