New Tax Rules in Ukraine

Starting from this year a number of amendments to the Ukrainian tax laws entered into force. Despite heated discussions over several versions of the Ukrainian tax reform, the adopted legislation has not radically changed the basic tax rules.

Below we provide highlights on some of the major changes:

Business taxation

Corporate income tax. The tax rate remains unchanged – i.e., 18%. As it was previously, the taxable profit shall be calculated according to the rules stipulated by the accounting standards, subject to some exceptions and differences. Two main changes are worth to be mentioned:

1. abolishing of the monthly advance tax payments (except for the first three quarters of 2016); and
2. establishing of a quarterly tax reporting period for the most businesses. The annual reporting period is still available to newly established companies, companies which annual revenues do not exceed UAH 20 million (approx. USD 860,000), and agricultural producers.

Value added tax. The basic tax rates remain unchanged – the import of goods and domestic supplies are subject to 20% VAT, while 0% tax applies to the export transactions. The VAT refund procedure also remains mainly unchanged. Major amendments in the laws are related to the grain supplies (VAT exemption of domestic grain supplies and their export is abolished) and to the special VAT regime available to agricultural producers (now the amount of collected VAT remaining at their disposal depends on specialization of a company).

Import duty. The additional 5/10% import duty that applied to import of food and non-food products has been cancelled.

Simplified tax system (available to small businesses). The tax rates for the 3rd group of taxpayers has been increased to 3% for the VAT payers and to 5% for the taxpayers not registered as VAT payers. The maximum revenue threshold allowed for the 3rd group taxpayers has been reduced from UAH 20 million to UAH 5 million (approx. USD 215,000). The tax rates for agricultural producers (i.e, the 4th group taxpayers) have been also slightly increased.

Personal and property taxation

Personal income tax. Now the Tax Code stipulates the 18% flat tax rate instead of the previous 15/20% tax. This general rate applies to the most types of individuals' income (salary, investment income, etc.). Dividends received from Ukrainian companies are still subject to 5% tax.

Social tax. Social tax payable by the employer has been reduced to the flat 22% rate (instead of previous rates ranging from 36.76% to 49.7%). The 3.6% social tax payable by the employee from the salary has been cancelled.

Property tax. Maximum tax rate has been increased from 2% to 3% of the minimal statutory wage per 1 sq. m. of the property. Owners of the residential property with the total area exceeding 300 sq. m. (for apartments) and 500 sq. m. (for houses) shall additionally pay UAH 25,000 per year (approx. USD 1,000) for each of such properties.

Transport tax. Passenger cars will be taxed depending on their age and the average market value. The car subject to tax shall not be older than 5 years and its average market value shall exceed UAH 1 million (approx. USD 43,000). The average market value of the cars will be determined pursuant to the methodology approved by the government. Previously, the tax was linked to the volume of the engine (i.e., an engine of over 3,000 cubic centimeters made a car subject to tax). The tax remains unchanged – UAH 25,000 (approx. USD 1,000) per year for each car.

For further information please contact Asters' partner Constantin Solyar
and partner Alexey Khomyakov.