Debt write-off from SRS of “sleeping” private individuals – how to use it and who exactly will be denied

In 2017, a mandatory payment of SDRs was introduced in the minimum amount. The tax was imposed even on those sole proprietors who did not receive any profit. At the time, the law provoked a barrage of criticism, as it was not news to anyone that many sole proprietors or self-employed persons with independent professional activities (hereinafter – NAPs) had irregular activities.

Then they were faced with a choice: to close the sole proprietorship completely, to pay the minimum SDR and incur losses during the “hibernation” period or not to pay the tax pending the cancellation of the claim, gradually increasing the debt.

Discussions on the abolition of the tax have been going on for a long time and later grew into Bill №592, which aims to eliminate discrimination against individual single contributors.

The law enters into force in two stages. The first – from 3 June 2020. The norms of this stage provide for the write-off of arrears accrued to SDR payers, as well as fines and penalties accrued on such amounts. The second stage will begin on 1 January 2020. Then the amendments to the Law on SSC will come into force to narrow the circle of single contribution payers.

We will dwell on the first stage in more detail, as the deadline for submitting applications for debt write-off expires on August 31, 2020.

Despite the fact that Law came into force on 3 June 2020, the real opportunity to submit relevant applications appeared only on 10 August 2020, when another Bill №786, adopted in the previous month, came into force. The relevant law regulates a number of problems with legal inconsistencies that arose in June.

What are arrears amounts to be written off?

  • Those accrued for the period from 1 January 2017 to 3 June 2020 (there are only two categories of taxpayers – sole proprietors, except for those who have chosen a simplified system of taxation and persons who conduct NAPs);
  • Those that are unpaid as of 3 June 2020;
  • In respect of which the payer submitted an application by 31 August  2020 inclusive.
  • Fines and penalties accrued on these amounts of arrears are also subject to write-off.

When applying by August 31, debt write-off for non-working sole proprietors is carried out if:

  • FOP submits an application for termination of activity and reporting under the requirements of Part 2 of Art. Law №592 for the period from 1 January 2017 to 3 June 2020 (if the report was not submitted earlier);
  • persons engaged in independent business activity submit documents on deregistration as a payer of SRS, as required by law №592.

But the tax has grounds for refusing to write off debts in the following cases:

  • if the taxpayer received income from 1 January 2017 to 3 June 2020, even the minimum (then it is not classified as unemployed);
  • if the amounts of arrears, as well as the fines and penalties accrued on them, were fully paid or collected independently;
  • It is likely that those sole proprietors and persons with NAP who have submitted applications, respectively, to terminate business activities or to cancel the status of a payer of SDRs by 03.06.2020 will be denied – because Law №592 requires an application after its entry into force on write-off.

What steps do you need to take to get your arrears written off?

Private individual: submit an application for state registration of termination of business activity to the state registrar at the location of the registration file of a natural person – entrepreneur and to the tax authority – reporting (for the period from 1 January 2017 to the date of entry into force of Law № 592-IX) reporting has not been submitted before.

Self-employed persons engaged in independent professional activity: submit to the tax authority at the main place of registration an application for deregistration as a single contribution payer and reporting (for the period from January 1, 2017 to the date of entry into force of Law № 592-IX) if reporting has not been submitted before.

Also for individuals engaged in independent professional activity it is necessary to register the termination of independent professional activity (or suspension or change of organizational form of the relevant activity from independent (individual) to another) and submit to the supervisory authority an application for liquidation of the taxpayer (form 8- OPP). Confirmation of the termination of independent professional activity is the information (extract) of the relevant register, which includes information on the state registration of such activity.

Therefore, we advise you not to delay and in case of fulfillment of mentioned above conditions, to submit a corresponding application to the Tax Office. After receiving information from the state registrar (regarding FOPs) or application for deregistration as a single contribution payer (from the person conducting the NAP) and provided that the payer submits reports on SRS, the tax service is given 15 working days to conduct an in-house inspection. Based on its results, a decision will be made to write off the amount of arrears, penalties and fines.