Tax relief in areas of hostilities: new rulings by the Supreme Court

Following the outbreak of full-scale war, the legislature introduced measures to exempt taxpayers from certain property taxes on buildings and plots of land situated in areas of hostilities or temporary occupation. At first glance, the logic was clear: if the state officially recognises a territory as dangerous or occupied, no tax liabilities should arise in respect of immovable property and land in that territory.

However, the practical implementation of this initiative proved to be considerably more complex.

By Law No. 2120-IX, which came into force on 17 March 2022, paragraph 69 of subsection 10 of Section XX of the Tax Code of Ukraine (hereinafter – the TCU) was, in particular, supplemented by sub-paragraphs 69.14 and 69.15. Thus, sub-paragraph 69.14 provided that from 1 March 2022 until 31 December of the year following the year in which the state of war or state of emergency is terminated or lifted, no land tax shall be assessed or paid in respect of plots located in territories where hostilities are (or were) taking place, or in temporarily occupied territories, as well as plots identified by regional military administrations as contaminated with explosive ordnance or occupied by fortifications. The list of such territories was to be determined by the Cabinet of Ministers of Ukraine (hereinafter – the CMU). Under the same conditions, the minimum tax liability was not assessed or paid in 2022 and 2023 (sub-paragraph 69.15).

Law No. 2142-IX, which came into force on 5 April 2022, added sub-paragraph 69.22 to paragraph 69 of Subsection 10 of Section XX of the Tax Code of Ukraine. This sub-paragraph provided for an exemption from tax on immovable property, other than land plots, in respect of property situated in territories where hostilities are (or were) taking place, or in temporarily occupied territories, as well as residential property rendered uninhabitable as a result of military aggression by the Russian Federation. The list of territories where hostilities are (were) taking place and territories temporarily occupied by armed formations of the Russian Federation (hereinafter referred to as the ‘List of Territories’) is to be determined by the Cabinet of Ministers of Ukraine.

The Cabinet of Ministers has not directly approved such a list, but has established the procedure for its compilation and authorised the Ministry for the Reintegration of the Temporarily Occupied Territories of Ukraine (hereinafter – the Ministry of Reintegration) to do so, in consultation with the Ministry of Defence and on the basis of proposals from the relevant regional military administrations.  The relevant provisions are set out in the CMU resolution ‘Certain issues concerning the compilation of a list of territories where hostilities are (were) taking place or which are temporarily occupied by the Russian Federation’ dated 6 December 2022  No. 1364 (hereinafter – Resolution No. 1364).

This resulted in the issuance of Order No. 309 of the Ministry of Reintegration dated 22 December 2022 (hereinafter – List No. 309); however, the tax authorities insisted that this document could not, allegedly, be used for taxation purposes. Further practical questions arose due to the classification of territories in List No. 309 into areas of potential hostilities, areas of active hostilities, areas of active hostilities where state electronic information resources are operational, and temporarily occupied territories: Do all these categories entitle the taxpayer to relief? From what date does it apply? Can a law adopted at a later date worsen the taxpayer’s position in respect of past tax periods? The Supreme Court has gradually established the answers to these questions.

List No. 309 applies for tax purposes. In fact, the dispute arose because the tax authorities based their interpretation on the literal wording of the original version of sub-clauses 69.14 and 69.22 of paragraph 69, Sub-section 10, Section XX of the Tax Code of Ukraine; that is, if the Code referred to a list of territories determined by the Cabinet of Ministers of Ukraine, then an order issued by the Ministry of Reintegration could not establish such a list or serve as a basis for a tax relief. Put simply, the State Tax Service attempted to apply the new, narrower criteria of Law No. 3050-IX to a period when the previous version of the Tax Code—which was more favourable to the taxpayer—was in force. The Supreme Court ruled that this approach was incorrect. In its ruling of 26 March 2026 in Case No. 520/10902/23, the Supreme Court concluded that List No. 309 fulfils precisely the role referred to in sub-paragraphs 69.14 and 69.22 of paragraph 69 of Subsection 10 of Section XX of the Tax Code of Ukraine, namely, it defines the list of territories rather than establishing tax rules. The rules governing tax exemptions are laid down directly in the Tax Code, whilst the Order of the Ministry of Reintegration merely sets out the territorial criterion to which the Code links the application of the relief.

The court also noted that the original versions of these legal provisions contained a reference to the fact that the list of territories where hostilities are (were) taking place or which are temporarily occupied by armed formations of the Russian Federation is determined by the Cabinet of Ministers of Ukraine. However, this imprecision in the legislator’s wording was subsequently rectified by the re-drafting of these specific provisions in accordance with Law No. 3050-IX. This clarification does not mean that, prior to 6 May 2023 (the date on which Law No. 3050-IX came into force), List No. 309 had no legal significance for tax purposes.
Another conclusion set out in this court ruling is particularly important: if the state has recognised a certain territory as a territory of hostilities or temporary occupation, a tax or other authority may not, at its own discretion, recognise this status for some legal relationships whilst failing to recognise it for others.
The Supreme Court also confirmed its conclusion regarding the applicability of List No. 309 to the legal relationships in dispute in its ruling of 21 May 2026 in Case No. 320/18031/23. The tax authority again insisted that List No. 309 could not be used in tax legal relationships and also referred to explanatory letters from the Ministry of Reintegration and the Ministry of Finance, which expressed the view that List No. 309 could not be applied for tax purposes. The court rejected these arguments on the grounds that such letters are of an informative or advisory nature, do not constitute sources of law and cannot limit the scope of the reliefs expressly provided for in the Tax Code of Ukraine.

Read the full article on the “All About Accounting”
website. Published in Issue No. 72 dated 7 September 2026