How can an agricultural producer retain Group 4 single tax status even without a 75 per cent share? A success story from Synegor Law Firm

Lawyers at Synegor Law Firm successfully defended the interests of an agricultural producer from the Kharkiv region in a dispute concerning the confirmation of its status as a Group 4 single tax payer for 2026. Following a refusal by the regional State Tax Service authority, the client appealed against this decision through administrative channels, and, following consideration of the appeal, the State Tax Service of Ukraine overturned the refusal and upheld the taxpayer’s appeal.

The crux of the matter was that the supervisory authority had applied a formalistic approach: if the proportion of agricultural production for the previous year was less than 75 per cent, the taxpayer allegedly lost the right to the Group 4 simplified taxation system. At the same time, the Tax Code of Ukraine (TCU) contains an important exception: if such a situation arose due to force majeure, the 75 per cent requirement does not apply, provided there is proper documentary evidence, in particular a decision by the regional council and inclusion in the list of affected businesses. It was precisely on this mechanism that the defence’s legal position was based.

The fourth group of the single tax is the most popular taxation system amongst farmers. However, this taxation system may only be applied provided that a number of criteria are met, the key one being that agricultural production must account for at least 75 per cent – that is, the proportion of an agricultural producer’s income derived from the sale of agricultural produce of their own production and processed products thereof, as a percentage of their total income, must be equal to or exceed 75 per cent. And if the required proportion cannot be met, is this an automatic ground for losing the right to be classified in Group 4?

We will examine how this issue is regulated in the Tax Code of Ukraine below.

As a general rule, set out in sub-paragraph 298.8.4 of paragraph 298.8 of Article 298 of the Tax Code of Ukraine,  if the share is less than 75 per cent in the reporting year, the agricultural producer shall pay taxes in the following tax (reporting) year on the general terms. However, this provision also contains an exception, namely, if the proportion does not exceed 75 per cent due to the occurrence of force majeure circumstances in the previous tax (reporting) year, this requirement does not apply to the taxpayer in the following tax (reporting) year. To confirm their status as single tax payers, such taxpayers must submit a tax return together with a decision by the regional councils confirming the existence of force majeure circumstances and a list of business entities affected by such circumstances.

On 6 May 2023, paragraph 10 was added to Subsection 8 of Section XX ‘Transitional Provisions’ of the Tax Code of Ukraine. In accordance with sub-paragraph 10.1 of this paragraph, for the purposes specified in sub-paragraph ‘a’ of sub-paragraph 4 of paragraph 291.4 of Article 291, sub-paragraph 298.8.4 of paragraph 298.8 of Article 298 and sub-paragraph 4 of paragraph 299.10 of Article 299 of this Code, the share of agricultural commodity production for the previous tax (reporting) year for single-tax payers in the fourth group, where at least 30 per cent of the total area of agricultural land and/or water fund land owned or used by them, including under lease, was located in the previous tax (reporting) year was situated for at least six months in territories where hostilities are (were) taking place, or in territories temporarily occupied by armed formations of the Russian Federation, must be equal to or exceed 50 per cent.

In other words, for Group 4 single-tax payers, where part of their land (at least 30 per cent) is situated in areas of hostilities or occupation (for at least half a year), the permissible share of agricultural production has been reduced from 75 per cent to 50 per cent.

The regional tax authority concluded that, even in the presence of a decision by the regional council, the proportion must still be at least 50 per cent (the client’s proportion was 0 per cent) and refused to confirm the client’s status as a single-tax payer

In formulating their legal position in this dispute, the lawyers at Synegor Law Firm drew upon, among other things, the conclusions of the Supreme Court set out in its ruling of 9 May 2025 in case No. 420/22049/24. The Supreme Court emphasised that the mechanism provided for in paragraph 2 of sub-clause 298.8.4 of clause 298.8 of Article 298 of the Tax Code of Ukraine (the existence of a regional council decision on force majeure circumstances and the inclusion of entities affected by such circumstances in the list), as a provision of general application, precludes any requirement regarding the share, regardless of its size. The mechanism provided for in the Transitional Provisions of the Tax Code operates separately from the mechanism provided for in paragraph 2 of sub-clause 298.8.4 of clause 298.8 of Article 298 of the Tax Code, and establishes an alternative eligibility criterion and specific share thresholds that entitle a taxpayer to remain in the fourth group under the relevant conditions. Each of the mechanisms set out above is separate, and no taxpayer is deprived of the right to utilise any of these mechanisms, depending on their specific and individual circumstances.

Upon considering the client’s complaint, the State Tax Service of Ukraine agreed with the arguments set out therein and adopted the taxpayer’s position. Therefore, even if the tax authority refuses to confirm the status of a single tax payer, such a refusal is not always lawful or final. Provided there is a correctly formulated legal position, adequate evidence and a timely appeal, an agricultural producer can effectively protect their right to the special tax regime.

Synegor Law Firm handles tax disputes for the agricultural sector, particularly regarding the confirmation of Group 4 single tax payer status, and defends clients’ interests through administrative and judicial proceedings.