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Tax Guide Ukraine

Overview

Located in Europe, Ukraine is one of the largest countries in Europe. The country is divided in 24 provinces and the Autonomous Republic of Crimea. The capital city of Ukraine is Kyiv which is also the largest city in the country. The local currency is Hryvnia (UAH) and the official language of Ukraine is Ukrainian. The country had a population of approximately 42 million as of 2020.

The country is known for its well-educated workforce and thus the human capital is perhaps its biggest asset. Due to the huge size of the country and its closeness to both, European Union and the former USSR allows it to have a unique position and be an attractive option for investment.

The Ukrainian economy faced immense trouble in the years 2014-2015 where the GDP of the country declined significantly and devaluing the currency in the process.

During the pandemic in the year 2020, the government of Ukraine introduced several tax incentives in order to support the economy. This was done through introduction of tax reforms and labor legislations in order to support businesses and individuals to help them in mitigating the effects of Covid-19. The tax legislation was amended by the parliament of Ukraine in 2020 under which some changes have already taken effect in May and July 2020 and the remaining changes have taken effect since 1st January 2021. After a treaty between European Union and Ukraine known as the Association Agreement, the government of Ukraine is currently implementing the EU standards in its customs legislations.

Corporate Income Taxes in Ukraine

The corporations in Ukraine are taxed base don their resident or non-resident status. For the resident corporations, the CIT rates are applicable on their worldwide income but for nonresident entities, the taxes are applicable only on the income which arises in Ukraine. The standard rate of tax in Ukraine for corporations is of 18%. Moreover, a withholding tax at the rate of 15% is also applicable on the passive incomes of non-resident corporations unless they are subject to exception under a DTT (Double Tax Treaty).

In addition to the standard tax rates payable by the corporations, the insurance companies are further taxed at the rate of 0% or 3% depending on certain types of insurances. However as a result of this special tax of 0% and 3%, the overall CIT base of insurance companies reduces. 

The gambling organizers are subject to a 28% additional tax in addition to the standard CIT rates. This rate has been further revised and increased to 30% with effect on 1st January 2021. Gambling activities such as casinos and bookmakers are subject to a 18% tax in addition to the standard CIT rates.

Personal income taxes in Ukraine

Taxes on personal income in Ukraine are applied to the world-wide income of the residents of the country with the exception of the restrictions relevant and applicable under the double tax treaty or DTT.

The non-residents however are charged a tax on their incomes generated within Ukraine during their employment in the country regardless of the fact whether the employer is a resident or nonresident.

The tax rates applicable to both residents and non-residents remain the same.

The rate of tax is 18% for all incomes whether from employment or from a foreign source. Moreover, any passive incomes such as those from interest and dividends (non-ordinary) are also subject to a 18% tax rate. Dividend income from those corporations which are resident and pay corporate income tax will be charged tax at 5% whereas those dividends which are received from non-resident companies are charged tax at 9%.

Military tax on personal income

A military tax on personal income at the rate of 1.5% is payable by all individuals since it was introduced in August 2014. The tax is to remain in effect until the reformation of the military is completed in Ukraine, the completion for which would be confirmed by the decision of the Parliament. In the case of military tax, it is the responsibility of the employer or the tax agent to withhold this tax and in cases where the employer or the tax agent does not withhold it, it is the responsibility of the individuals to declare it on their own within the due date of filing of Personal Income taxes.

Consumption tax

A Value added tax or VAT is a consumption tax applicable on all transactions in Ukraine. The tax rate of all transactions in general is 20% with some exceptions in which the VAT has been reduced.

The import and supply of some agricultural products including the products of animal origin are subject to a 14% VAT. The supply and import of certain medicines, medical goods and equipment use in clinical trials are subject to a reduced rate of 7%. This sis also applicable for services of the cultural, art and tourism sector, whereas the export and reexport of goods are subject to a 0% VAT rate.  

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