Discover employer and employee tax responsibilities in Ukraine
Employers have several tax responsibilities in Ukraine. These include the Unified Social Contribution (USC), Personal Income Tax (PIT), and Military Tax.
Employers are required to pay the USC on employee salaries. The standard rate is 22% of the employee's gross salary.
Employers are also responsible for withholding PIT from employee salaries and remitting it to the tax authorities. The standard PIT rate is 18%.
In addition to the USC and PIT, employers must withhold a 1.5% military tax from employee salaries.
Taxes withheld from employee salaries, such as the PIT and military tax, must be paid to the tax authorities on the same day the salary is paid. The USC, on the other hand, must generally be paid by the 20th of the month following the month in which the salary was paid.
Employers are required to register as taxpayers with the Ukrainian tax authorities. This registration process can usually be completed online.
In Ukraine, there are several types of taxes that are deducted directly from an employee's salary. These include the Personal Income Tax (PIT), the Military Tax, and the Unified Social Contribution (USC).
This is an income tax on an individual's earnings. All employees earning income in Ukraine are eligible for this tax. Ukraine uses a flat PIT rate of 18%. This tax is withheld directly from the employee's salary by the employer.
This is a temporary tax supporting Ukraine's defense efforts. All employees earning income in Ukraine are eligible for this tax. The military tax is a flat rate of 1.5% withheld from the employee's salary.
Although the USC is a mandatory social security contribution, it is paid by the employer and not deducted from the employee's salary. However, it's important to understand that it affects the overall cost of employment. The standard USC rate is 22%.
The standard VAT rate in Ukraine is 20%, which applies to most supplies of services within the country. However, certain services are zero-rated for VAT, meaning no VAT is charged on those services, but the supplier can still claim input VAT credits for related expenses. These zero-rated services include the export of services, international transportation services, and specific educational, healthcare, and cultural services.
On the other hand, some services are exempt from VAT. This means that no VAT is charged, and the supplier cannot claim input VAT credits on related expenses. Exempt services may include financial services, insurance services, and letting of residential property under certain conditions.
Regarding VAT filing procedures, businesses exceeding the VAT registration threshold (currently 1 million Ukrainian Hryvnia in annual taxable turnover) must register for VAT with the State Tax Service of Ukraine. VAT returns are generally filed monthly (quarterly for smaller taxpayers), and payments are due by the 20th of the following month. Filing and payments are submitted through the tax authority's electronic system.
Businesses providing taxable services can generally claim credits for VAT paid on inputs related to the provision of those services. There are also simplified VAT regimes available for small businesses.
Businesses can take advantage of several tax incentives to reduce their tax liability. These incentives are designed to encourage business growth, stimulate investment in certain sectors, and promote economic development.
Businesses can defer payment of Corporate Income Tax (CIT) on profits that are reinvested in the business for a specific period. This incentive applies to various sectors, including manufacturing and agriculture.
Qualified IT companies can benefit from a reduced profit tax rate of 9% instead of the standard 18% under a special regime known as "Diia City".
Exemptions or reduced CIT rates may apply to investments in priority sectors designated by the government, such as renewable energy or high technology.
Businesses operating in designated industrial parks or free economic zones may be eligible for exemptions on import duties and VAT for imported equipment.
New investment projects may qualify for a temporary exemption from land tax payments.
Small and medium-sized enterprises (SMEs) can benefit from a reduced profit tax rate under a simplified taxation system.
Specific incentives target particular sectors deemed crucial for economic development. Certain benefits require a minimum investment threshold. Some incentives may be linked to creating a specific number of new jobs. Benefits may be available for businesses operating in designated zones or regions.
Identify relevant incentives through resources like UkraineInvest and the State Tax Service of Ukraine. Consider seeking professional guidance from tax advisors or legal professionals to navigate the application process. Applications for specific incentives may involve submitting documents to relevant government agencies based on the incentive program.
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