The Register of Losses has opened category A3.5: how can individual entrepreneurs declare loss of profit due to the war?

The International Register of Losses is gradually expanding the list of categories within which citizens of Ukraine can record losses incurred as a result of the armed aggression of the Russian Federation. One of the new categories is A3.5 “Loss of private entrepreneurship”, which applies to individual entrepreneurs who, after February 24, 2022, lost profit from their activities in Ukraine due to the consequences of the war. For many entrepreneurs, this is a matter of correct legal understanding: who exactly has the right to such a statement, what will be considered a loss of private entrepreneurship, and what information should be prepared in advance.

Lawyers of the Repeshko and Partners Law Firm previously spoke about category A1.1 in the International Register of Damages, which recognizes damage related to internal displacement. They also explained the legal nuances of another section of the register – A1.2 – “Forced relocation outside Ukraine”.

Now they commented on how individual entrepreneurs can correctly assess the grounds for submitting an application to the Register of Losses under category A3.5, what to pay attention to when confirming loss of profit, which documents may be of decisive importance and why in such cases the accuracy of wording, completeness of evidence and the correct definition of the application category itself are especially important.

Applications to the Register – A3.5 “Loss of private entrepreneurship” can be submitted by individuals who are registered as individual entrepreneurs and have lost profit from their private entrepreneurship as a result of the aggression of the Russian Federation against Ukraine. This can be done through the web portal Diya.

An application for the loss of private entrepreneurship can be submitted by individuals registered as individual entrepreneurs, as well as persons acting on their behalf. This applies to cases where the loss occurred on the territory of Ukraine within its internationally recognized borders, including in territorial waters, after February 24, 2022, and was a consequence of internationally unlawful actions of the Russian Federation in Ukraine or against Ukraine.

Applications from or on behalf of legal entities must be submitted in other relevant categories (categories B or C). Claims under category A3.5 – Loss of Private Business may be made for loss of profits incurred by the Claimant as an individual entrepreneur.

Therefore, a claim under this category may be made if:

• you were registered as an individual entrepreneur (“IEP”) ​​under the laws of Ukraine or other applicable law;
• you lost the ability to operate as an IEP and as a result lost profits in Ukraine; and
• this was caused by the full-scale Russian invasion starting on February 24, 2022.

We are often asked: how do you confirm to a person that they were registered as an IEP? If you were registered as an individual entrepreneur in Ukraine, the following information should be automatically retrieved from the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations (make sure that this information is accurate and included in your application to the Register):

• individual tax number (RNOKPP);
• date and place of registration;
• whether the individual entrepreneur is active or has its registration been terminated;
• address at which the individual entrepreneur is registered;
• description of the individual entrepreneur’s activities.

Relevant evidence to prove the loss of private entrepreneurship may include:

• financial accounts of the individual entrepreneur for the years preceding the loss, contracts or tax reporting documents;
• your financial statements for the years preceding the loss income;
• contracts;
• tax documents.
• description and date of the event that caused the loss;
• description of the loss of self-employment,
• if applicable, the date you resumed self-employment.

Please note that this list is not exhaustive. The evidence submitted for loss of income must include evidence of the expenses that would have been incurred in order to obtain the income that was lost. In addition, you should provide as much evidence as is necessary to establish the amount of your lost income in Ukraine. It is up to you to decide what evidence to provide. However, in order to be able to assess the total amount of your lost income, we once again draw your attention to the fact that such evidence must include evidence of the expenses that you would have incurred in order to obtain the income that was lost.

The decision on whether your application may be included in the Register is made by the Register Board. Such a decision does not mean that the application will be considered on its merits or assessed, that any compensation will be awarded or that any payment should be made to you. The consideration of your application and the award of any compensation will be carried out by a future compensation mechanism (within the meaning of the Register Statute) that has yet to be established.

The Register will then process and consider the application and supporting evidence and decide whether your application is subject to inclusion in the Register. You will be informed of the Register’s decision in the prescribed manner via the Action.   In doing so, some information will be taken from various existing electronic sources, including the State Tax Service of Ukraine.

We recommend that you provide all relevant evidence in support of your application. This includes any documents, records, statements, photographs or other materials that will assist the Register in processing and considering your application. We also recommend that you keep the originals of all evidence and any potential further evidence that you may wish to submit at a later date pending the processing of your application.

You will be able to submit additional information and upload files of evidence in support of your Application in accordance with the Registry’s technical requirements. You will have the opportunity to review all information before it is submitted to the Registry. You do not have to complete the entire application at once. You may save a draft of your application and complete it later, but it is advisable to ensure that all the necessary information is prepared and available to you.

You must also ensure that the files submitted as part of your application are accessible, readable and free from computer viruses or any malicious software. If the Registry finds that the files you submit are inaccessible, unreadable or infected, your application may not be entered in the Registry.

It is worth knowing that by submitting your application, evidence and information provided in support of the application, you agree to transfer personal data to the Register and authorize the Register to store, process and transfer such personal data in accordance with the principles of personal data protection in the work of the Register.

Applications from citizens of the Russian Federation are not subject to inclusion in the Register. However, applications from citizens of the Russian Federation may be included in the Register if they can prove that they also have another citizenship.

By submitting your application, as well as the evidence and information provided in support of the application, you confirm that they accurately reflect your identity as an applicant, your citizenship, your right to submit an application and the content of the application. You understand that submitting a false or falsified application may result in your application being recognized as manifestly unfounded and not being included in the Register.

We emphasize once again that this category of the Register applies exclusively to lost profits in Ukraine. If your claim relates to other losses, such as business relocation costs or loss of assets, you should file under category A3.7.

You can also apply to the Register in this category in the following cases:

• due to the full-scale Russian invasion, you as an individual entrepreneur were forced to relocate to another location in Ukraine and as a result lost profits.
• due to the full-scale Russian invasion, you closed your individual entrepreneur in Ukraine and as a result lost profits, but instead started a new business in another country.
• you closed your individual entrepreneur and lost profits when, due to the full-scale Russian invasion, your employees were forced to leave and were unable to find new ones.

If you are an individual entrepreneur and carry out many types of activities, and the full-scale Russian invasion negatively affected some of them and as a result you lost profits, you should submit one application and include all the information in it.

For the purposes of this category of the Register, “loss of private entrepreneurship” does not necessarily mean that you must close your individual entrepreneur. Evidence of loss of income is sufficient.

If you have previously received financial or other assistance from the state, international donors or civil society organizations, you can also submit an application regardless of whether you have received financial or other assistance.

Currently, the following information will be required in the application:

• full name, gender, date of birth, citizenship;
• identification document/passport number;
• registration number of the taxpayer’s registration card of Ukraine;
• unique entry number in the Unified State Demographic Register of Ukraine
• registered place of residence of the applicant; the applicant’s current address of actual residence;
• contact telephone number(s), email address;
• subgroup of the applicant (e.g., military serviceman, member of local community volunteer groups, law enforcement officer, emergency/rescue/communal services/critical infrastructure facility employee, medical worker);
• information on whether the applicant has been convicted of a crime in connection with the Russian aggression against Ukraine;
• whether the applicant is subject to sanctions or other equivalent restrictive measures imposed by the government or an international organization;
• if the application is submitted through a representative, equivalent information identifying such representative;
• identification of private enterprise, registration number in the Unified State Register of Legal Entities persons, individual entrepreneurs and public formations, date of registration, place of registration of private entrepreneurship;
• whether the private entrepreneurship is in good standing (not liquidated/under liquidation)
• registered address, actual address of private entrepreneurship, contact telephone number(s), e-mail address(es);
• type of business activity, detailed description of business activity
• event(s) that led to the loss of private entrepreneurship, type of event(s) that led to the loss of private entrepreneurship, date of event(s) that led to the loss of private entrepreneurship, date of restoration of private entrepreneurship (if any), description of the event;
• evidence of the loss of private entrepreneurship, detailed description of the loss;
• estimated amount of the claim in the application, detailing of the estimated amount of the claim in the application, calculation methodology, further detailed description the amount of the claim, evidence of profit and other financial statements of private entrepreneurship for the years preceding the loss;
• information on relevant court cases or investigations by law enforcement agencies;
• additional evidence regarding the identity of the applicant, additional evidence regarding the circumstances of the loss of private entrepreneurship, additional evidence regarding other aspects of the application.

As we can see, the International Register of Losses continues to open new categories, expanding the list of grounds and the range of persons who will be able to claim compensation in connection with military operations on the territory of Ukraine in the future.

Therefore, we advise individual entrepreneurs not to postpone the preparation of documents, collect financial statements, tax documents, contracts and other confirmations of loss of profit in advance, carefully check their registration data and clearly determine whether your situation corresponds to category A3.5. At the same time, it is important to remember that filing an application with the Register does not automatically mean that compensation will be awarded, but a properly prepared application is the necessary basis for further protection of your right to compensation.