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Ukraine

General Information

Country Name: Ukraine
Currency: Ukrainian Hryvnia (UAH)
Primary Tax Authority: State Tax Service of Ukraine (STSU)

Key Legislation

  • Constitution of Ukraine: Establishes the fundamental principles of taxation and economic governance.
  • Tax Code of Ukraine: Provides comprehensive regulations on all forms of taxation including corporate income tax, personal income tax, VAT, and others.
  • Law on Corporate Income Tax: Governs the taxation of corporate entities.
  • Law on Personal Income Tax: Regulates individual income tax obligations.
  • Law on Value Added Tax (VAT): Defines VAT regulations.
  • Customs Code of Ukraine: Covers customs duties and import/export regulations.

Fiscal Authority Allocation

Ukraine has a centralized tax system, with the State Tax Service of Ukraine (STSU) responsible for most tax collection and enforcement. Local authorities have limited taxing powers.

Taxes Collected by Central Authorities:

  • Personal income tax (PIT)
  • Corporate income tax (CIT)
  • Value-added tax (VAT)
  • Customs duties
  • Excise tax

Taxes Collected by Local Authorities:

  • Property tax
  • Land tax
  • Local fees and charges

Revenue Sharing Mechanisms:

Local governments receive a portion of tax revenues through transfers from the central government. However, most major taxes are collected centrally.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 18% for most companies. A reduced rate of 5% applies to certain small businesses and specific industries.
  • Incentives and Exemptions: Special economic zones and high-tech industries may qualify for tax holidays or reduced rates.
  • Loss Carryforwards: Losses can be carried forward for up to 5 years. Carrybacks are not permitted.

Value-Added Tax (VAT)

  • Standard VAT Rate: 20% on most goods and services.
  • Reduced VAT Rates: 7% for certain goods such as pharmaceuticals and some food products.
  • Exemptions: Certain educational, healthcare, and cultural services are exempt from VAT.
  • Refunds: VAT refunds are available for exports and certain eligible businesses.

Personal Income Tax (PIT)

  • Progressive Tax Rates: Rates range from 18% to 45%. The top rate applies to annual income exceeding UAH 1,200,000.
  • Tax-Free Threshold: Income up to UAH 3,200 per month is tax-free.
  • Allowances: Various personal allowances and deductions are available, including for dependents and specific expenses.
  • Dividends: 5% withholding tax on dividends paid to residents and non-residents.
  • Capital Gains: Gains from the sale of securities are taxed at 18%.

Additional Mandatory Contributions

Social Security Contributions:

  • Total Contribution Rate: Approximately 22% of gross salary.
  • Employer Contribution: 22% for social insurance, including pension, health, and unemployment insurance.
  • Employee Contribution: 1.5% for social insurance. Health insurance is also part of the employer’s contribution.

Contribution Thresholds:

Contributions are calculated up to a certain ceiling, adjusted annually. For 2024, the ceiling for social insurance contributions is UAH 35,000 per month.

Tax Deductibility:

Social security contributions are deductible for income tax purposes.

Withholding Taxes

  • Dividends: 5% withholding tax on dividends paid to residents and non-residents.
  • Interest: 15% withholding tax on interest payments.
  • Royalties: 15% withholding tax on royalties paid to non-residents.
  • Service Fees: Payments for services provided by non-residents are subject to a 15% withholding tax.

Transfer Pricing Rules

Ukraine follows OECD guidelines for transfer pricing. The arm’s length principle applies, and companies must maintain proper documentation for related-party transactions.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies in SEZs benefit from reduced CIT rates and other incentives.
  • High-Tech Zones: Investments in high-tech zones may receive tax exemptions and reduced rates.
  • Infrastructure Projects: Significant infrastructure investments may qualify for tax holidays and other incentives.

Other Taxes

  • Excise Tax: Applied to certain goods such as alcohol, tobacco, and fuel at varying rates.
  • Property Tax: Levied on property owners based on property value.
  • Land Tax: Applied to landowners and users, with rates depending on land location and type.

Double Taxation Agreements (DTAs)

Ukraine has signed 80 DTAs to avoid double taxation and provide reduced withholding tax rates on dividends, interest, and royalties.

Compliance and Reporting

  • Corporate Tax Filing Deadline: Corporate tax returns must be filed annually by March 1 of the following year.
  • VAT Filing: VAT returns are filed monthly.
  • Personal Income Tax Filing: PIT returns are due annually by May 1 of the following year.
  • Penalties for Non-Compliance: Penalties for late filing or underpayment of taxes include fines and interest on unpaid amounts.

Recent Developments

  • Digital Tax Initiatives: Ukraine is implementing digital tax administration systems to improve efficiency and compliance.
  • Tax Incentives for Foreign Investment: New tax incentives are introduced to attract foreign investments, particularly in technology and infrastructure.
  • Revisions to Transfer Pricing Rules: Updates to transfer pricing regulations align with international standards to increase transparency and reduce tax avoidance.

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