Minimum tax liability is effective tool for ensuring tax burden from the use of agricultural land. There are key rules for calculating, applying transitional norms and declaring minimum tax liability by the land owners and users.
What is the minimum tax liability and who pays
Minimum tax liability is the minimum amount of tax liability associated with the ownership or use (lease, sublease, emphyteusis, permanent use) of land plots classified as agricultural land. Amount of the minimum tax liability is determined for each plot separately.
Who determines the minimum tax liability:
Minimum tax liability is determined by the owners and/or users of land plots.
In case of transfer of ownership or use during the year, the minimum tax liability is calculated proportionally: for the previous land user – for a period up to the month of the right termination, and for the new one – starting from the month of acquisition of such right (subject to the state registration).
If agricultural producer uses land of individuals without concluded lease agreement and without state registration, obligation to pay the minimum tax liability remains with the owner of such land plot.
Calculation formula of the minimum tax liability
For the land plot for which normative monetary value has been carried out, the minimum tax liability is determined by the formula: minimum tax liability = normative monetary value × coefficient × number of calendar months / 12, where:
- normative monetary value – is assessment of relevant land plot, taking into account indexation coefficient;
- coefficient (starting from 2025 and until the end of year in which martial law is terminated – constant coefficient of 0.057 is applied);
- number of calendar months during which land plot is owned, leased or used.
Guaranteed minimums and combat areas
During the martial law, amount of the minimum tax liability for the year cannot be less than:
- 700 UAH per 1 hectare – general minimum;
- 1400 UAH per 1 hectare – for areas where share of arable land is 50% or more.
Important: specified minimum limits (700/1400 UAH) do not apply to land plots located in areas of possible hostilities or temporary occupation (according to the official List approved by Order of the Ministry of Development № 376). Calculating amount according to the formula – amount must be compared with the minimum allowable value and the higher one is chosen.
What payments are taken into account for determining minimum tax liability
Minimum tax liability does not mean that the payer must additionally pay the entire calculated amount of the minimum tax liability, regardless of already paid taxes. Mechanism involves comparing calculated minimum tax liability with amount of taxes, levies and land lease costs.
Therefore, the minimum tax liability actually determines the minimum level of tax burden associated with the use of agricultural land.
Declaration
Single tax payers reflect calculation of the total minimum tax liability in special annexes to tax declarations (separately for each plot, indicating area, normative monetary value, coefficient and period of use):
- Single tax payers of Group III – in Annex "Calculation of the total minimum tax liability for the tax (reporting) year" to declaration.
- Single tax payers of Group IV – in Annex 3 "Calculation of the total minimum tax liability for the tax (reporting) year" to declaration.
More information about application peculiarities of the minimum tax liability is at the link: https://tax.gov.ua/baneryi/onlayn-navchannya/ediniy-podatok/yuridichni-osobi/ediniy-podatok-dlya-platnikiv-tretoi-grupi/osoblivosti-spravlyannya/1058189.html