UkraineTax Obligations Detailed

In Ukraine, employers face several tax obligations, including withholding income tax and military tax from employee salaries and paying the unified social contribution.

Income Tax

• Rate: 18% of gross salary.

Military Tax

• Rate: Increased from 1.5% to 5% of gross salary as of December 1, 2024.

Unified Social Contribution (USC)

• Rate: 22% of gross salary.
• Payment: Paid by the employer.
• Maximum Base: Capped at 20 times the minimum monthly wage as of January 1, 2025 (UAH 160,000 as of January 1, 2025, assuming a minimum wage of UAH 8,000).
• Minimum USC Contribution: 22% of the minimum wage set on the first day of the month the salary is paid (UAH 1,760 as of April 1, 2024).
  • The minimum wage as of January 1, 2025 is expected to be UAH 8,000.

Corporate Income Tax (CIT)

• Standard Rate: Generally 18%.
• Financial Institutions: 25% (excluding insurance companies) effective January 1, 2025.
• Banks: 50% for the 2024 fiscal year.
• Advance Payments: Required for businesses involved in retail fuel sales (UAH 30,000 - 60,000 per month per point of sale, depending on fuel station type). Excess advance payments are non-refundable, and cannot be carried forward.

Reporting

• Payroll Reporting: Quarterly. Due 40 days after the end of the quarter.
• Annual Corporate Income Tax Return: Due within 60 calendar days after the reporting year-end.
• Tax Year: Calendar year (January 1 to December 31).

Other Relevant Information

• Minimum Wage: The minimum wage was UAH 6,700 per month at the beginning of 2024 and it was expected to be UAH 8,000 per month as of January 1, 2025. Note that this is subject to change.
• Currency: Ukrainian Hryvnia (UAH)
• Payroll Cycle: Semi-monthly
• VAT: Standard rate is 20%. Reduced rates apply to specific goods and services, such as essential food products (14%) and pharmaceuticals (7%).

In Ukraine, employers withhold and remit several taxes from employee salaries, including Personal Income Tax (PIT), military tax, and the Unified Social Contribution (USC).

Personal Income Tax (PIT)

The standard PIT rate is 18% of an employee's gross income.

Military Tax

As of January 1, 2025, the military tax rate increased to 5% of the employee's gross income. This represents a significant increase from the previous 1.5% rate.

Unified Social Contribution (USC)

The USC is a tax paid by both employers and employees. The employer's contribution is 22% of the employee's gross salary up to a monthly cap. As of January 1, 2025, this cap is 20 times the minimum monthly wage (UAH 160,000 as of this date, assuming a minimum wage of UAH 8000).

Tax Deductions

Several deductions can reduce an employee's taxable income. These include payments for education within Ukraine (capped at three times the minimum wage - UAH 24,000 monthly as of January 1, 2025), certain medical expenses, mortgage interest payments, life insurance premiums and charitable contributions, especially those directed towards military aid. Additional deductions may be available. Consult with a tax professional for specific guidance.

Employer Responsibilities

Ukrainian employers act as tax agents, responsible for withholding taxes from employee salaries and remitting them to the tax authorities. For bank transfers, taxes must be paid on the employee's payday. For cash payments, taxes must be remitted within three days. Employers must file quarterly payroll reports within 40 days of the quarter's end. Payslips, either paper or digital, must be provided to employees after each pay period, detailing salary, withheld taxes, and other deductions.

Tax Residency

Ukrainian tax residents are taxed on their worldwide income, while non-residents are taxed only on Ukrainian-sourced income. Both are subject to the same tax rates. Employees are generally considered residents if they are domiciled in Ukraine. Those who work remotely for Ukrainian employers while residing in another country may face different tax obligations in both countries. This can be a complex issue, and consulting a tax advisor is recommended.

Additional Information

• Minimum Wage: As of 2023, the minimum wage in Ukraine was UAH 6700 per month. Please verify the current minimum wage as it may have been adjusted since that time. Note that wages must be paid twice monthly, with an advance payment between the 15th and 20th and the remaining amount between the 1st and 7th of the following month.

• Annual Tax Return: If an individual's income was not fully subject to withholding by a tax agent (e.g. foreign investment income), they must file an annual tax return by April 30th of the following year and pay any remaining taxes. This also applies if claiming certain deductions.

This information is current as of February 5, 2025, and may be subject to change. Always consult with a qualified tax professional for personalized advice.

In Ukraine, Value Added Tax (VAT) is a consumption tax applied to most goods and services.

VAT Rates and Application

• Standard Rate: 20% (as of February 2025). This rate applies to most goods and services. Note that some sources mention planned changes to the standard VAT rate, however, as of today, these changes have not yet been implemented.
• Reduced Rate: 14% applies to specific agricultural products.
• Special Reduced Rate: 7% applies to pharmaceuticals and medical equipment.
• Zero Rate: 0% applies to exports of goods and services.
• Exemptions: Certain goods and services are exempt, including some educational and healthcare services, specific periodicals, and certain types of public transport.

VAT Registration

• Mandatory Registration: Businesses must register for VAT if their taxable turnover exceeds UAH 1,000,000 within a 12-month period.
• Voluntary Registration: Businesses can register voluntarily even if they are below the mandatory threshold.
• Non-Resident Digital Service Providers: Non-resident businesses selling digital services to Ukrainian consumers must register if their annual sales exceed UAH 1,000,000. B2B sales generally utilize the reverse-charge mechanism.

VAT Filing and Payment

• Returns: Monthly VAT returns are due within 20 calendar days after the end of the reporting month.
• Payment: VAT payment is due within 10 calendar days after the return filing deadline.
• Non-Resident Digital Service Providers: Simplified quarterly returns are due within 40 calendar days after the quarter's end, with payment due within 30 days of the filing deadline. Payments for non-residents can be made in EUR or USD.

VAT Refunds

• Refunds are generally processed within 26 calendar days after the VAT return deadline unless a tax audit is initiated.

Other Important Information

• Exempt Supplies: Some transactions are explicitly VAT-exempt, but it's crucial to understand the distinction between exempt supplies and zero-rated supplies. Some exempt supplies do not allow for the deduction of input VAT.
• Simplified Tax Regime: Businesses under the simplified tax regime may have different reporting periods and deadlines.
• Electronic VAT Administration: Ukraine utilizes electronic systems for VAT administration and reporting. VAT invoices are registered electronically.
• SAF-T UA Reporting: As of February 5, 2025, the Standard Audit File for Tax (SAF-T) reporting is planned to become mandatory in 2025 for large taxpayers and in 2027 for all other VAT payers.

Changes Related to Martial Law

• Some VAT exemptions and reduced rates related to essential goods and services during the period of martial law might be in effect. However, specific regulations are subject to change, and official government sources should be consulted for the most accurate and up-to-date information.

It's recommended to consult with tax professionals or refer to official government resources for the most up-to-date and precise information on Ukrainian VAT regulations. This overview is current as of February 5, 2025.

Ukraine offers several tax incentives designed to stimulate economic growth and investment. These incentives target various sectors, from large-scale investments to startups and specific industries like IT and aircraft manufacturing.

Tax Incentives for Businesses

• Voluntary Tax Compliance: Businesses meeting specific criteria, such as maintaining low tax debt, timely reporting, and adherence to other obligations, are eligible for benefits under the "White Business Club" initiative. Benefits include simplified customs procedures.

• Diia City: This initiative offers a special tax regime for IT companies, including a reduced corporate income tax rate and streamlined administrative processes. Eligibility is based on meeting certain R&D and operational criteria within the IT and telecom sectors.

• Investment Incentives: Large-scale investment projects exceeding €20 million and creating over 80 jobs may qualify for tax incentives up to 30% of the total investment. These projects must operate within specified sectors, potentially including R&D.

• Industrial Parks: Participants in designated industrial parks can benefit from various incentives, including exemptions from corporate income tax (for ten years if profits are reinvested), VAT, and import duties. Additional benefits may include land tax breaks at the discretion of local governments.

• Startups: The "eRobota" program provides grants ranging from UAH 750,000 to 3.5 million for startups in various stages. The program also covers R&D expenses.

• Aircraft Manufacturing: Until 2025, tax incentives are in place to support the establishment of full-scale serial production of modern aircraft within Ukraine.

Tax Incentives for Individuals

• Charitable Donations: Tax residents of Ukraine can claim deductions for documented charitable contributions. Specific requirements and limitations may apply.

General Tax Updates for 2025

• Tax Increases: Increased military tax from 1.5% to 5% on personal income (salaries, dividends, capital gains, etc.). Third-group Single Tax entrepreneurs now pay 1% of turnover. The corporate income tax rate for financial companies (excluding insurance) is 25%. A 50% CIT rate on banks is in effect for 2024.

• Unified Social Contribution (USC): Resumed for most entrepreneurs starting January 1, 2025, however some categories of individual entrepreneurs will retain benefits and not pay USC.

It is important to note that tax laws and regulations are subject to change. Consulting with a tax professional is recommended for the most up-to-date and personalized advice. This information is current as of February 5, 2025, and may not reflect future legislative changes.