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Personal Income Tax and Unified Social Contribution Rates Change
Baker&McKenzie, Kyiv, Ukraine,
Thu, Feb 11, 2016
On 1 January 2016, Law of Ukraine No. 909-VIII "On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine Regarding Insurance of Balance of Revenues in 2016" dated 24 December 2015 (the "Law") came into effect. The Law, in particular, amended (i) the Personal Income Tax rate; (ii) the procedure for payment and rates of the Unified Social Contribution (the "USC") and (iii) the maximum amount of the USC base.
Personal Income Tax Rate
Under the Law, the Personal Income Tax rate is now 18% of an employee's salary regardless of the amount of accrued salary.
Previously, the Personal Income Tax rate was tied to the amount of personal income. In particular, the Personal Income Tax rate of 15% applied if personal income did not exceed 10 times the Minimum Monthly Salary established on 1 January of the tax reporting year (i.e., if the amount of personal income did not exceed UAH 12,180, or approximately USD 470 at the current exchange rate). If personal income exceeded 10 times the Minimum Monthly Salary per month, the Personal Income Tax rate of 20% applied to income in excess of that amount.
Changes in the USC Rates
The Law also amended Law of Ukraine № 2464-VI "On Collection and Accounting of the Unitied Social Contribution" dated 8 July 2010. In particular, according to the Law, employers will no longer withhold the USC of 3.6% from employee' salaries.
The Law also reduced the USC rate that employers must pay to 22% (previously, the USC rate for employers ranged from 36.76 - 49.7% and was dependent on the employer's classification of professional risk).
Finally, pursuant to the Law, the maximum USC base has increased. It is now equal to 25 times the Subsistence Level for a working person (i.e., UAH 34,450, or approximately USD 1,328 at the current exchange rate). Previously, the USC base was 17 times the Subsistence Level for a working person (i.e., UAH 23,426, or approximately USD 903 at the current exchange rate).
Personal Income Tax Rate
Under the Law, the Personal Income Tax rate is now 18% of an employee's salary regardless of the amount of accrued salary.
Previously, the Personal Income Tax rate was tied to the amount of personal income. In particular, the Personal Income Tax rate of 15% applied if personal income did not exceed 10 times the Minimum Monthly Salary established on 1 January of the tax reporting year (i.e., if the amount of personal income did not exceed UAH 12,180, or approximately USD 470 at the current exchange rate). If personal income exceeded 10 times the Minimum Monthly Salary per month, the Personal Income Tax rate of 20% applied to income in excess of that amount.
Changes in the USC Rates
The Law also amended Law of Ukraine № 2464-VI "On Collection and Accounting of the Unitied Social Contribution" dated 8 July 2010. In particular, according to the Law, employers will no longer withhold the USC of 3.6% from employee' salaries.
The Law also reduced the USC rate that employers must pay to 22% (previously, the USC rate for employers ranged from 36.76 - 49.7% and was dependent on the employer's classification of professional risk).
Finally, pursuant to the Law, the maximum USC base has increased. It is now equal to 25 times the Subsistence Level for a working person (i.e., UAH 34,450, or approximately USD 1,328 at the current exchange rate). Previously, the USC base was 17 times the Subsistence Level for a working person (i.e., UAH 23,426, or approximately USD 903 at the current exchange rate).
Additional notes
This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.
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