Taxation in Ukraine
The taxation system in Ukraine is a complex structure that plays a vital role in the country’s economic strategy, striking a balance between generating revenue and fostering growth and investment. It includes various taxes, each regulated by an intricate array of rules and rates. For businesses, investors, and individuals, having a thorough understanding of this system is crucial for effective financial management and compliance.
Taxation system
Ukraine’s taxation system aims to be in harmony with national fiscal policies and international commitments, providing a systematic yet flexible method for taxation. It may incorporate a mix of flat rates, progressive scales, and specific exemptions, which are in line with the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, maintaining compliance, and taking advantage of the opportunities offered within the legal framework.
Capital gains tax
Ukraine imposes a capital gains tax on profits gained from selling assets, such as real estate and investments. The standard rate is typically 15%, although it can rise to 18% for specific categories of income.
Corporate taxation
In Ukraine, the standard corporate income tax (CIT) rate is set at 18%. Agricultural enterprises and small businesses may be eligible for a simplified tax system that offers a reduced rate of either 3% or 5% of sales. There are no extra corporate income taxes charged at regional or local levels. The CIT is determined based on self-assessment for each reporting period.
Personal income taxation
In Ukraine, personal income tax (PIT) is applied at a standard rate of 18% on various income sources such as salaries, employment benefits, foreign income, and other categories not specified elsewhere. Residents are subject to tax on their global income, whereas non-residents are taxed solely on income generated from Ukraine. Dividends have varying tax rates: 5% for those distributed by corporate income tax (CIT) payers and 9% for dividends distributed by others. Moreover, a military tax of 1.5% is applied to all taxable income.
Dividend taxation
In Ukraine, the taxation of dividends depends on the status of the payer. For dividends distributed by companies that pay corporate income tax (CIT), the tax rate is 5%. On the other hand, dividends from non-CIT payers or non-resident companies are taxed at 9%. Dividends that are not considered ‘ordinary’ are subjected to the standard personal income tax (PIT) rate of 18%. Furthermore, a 1.5% military tax applies to all dividend income.
Property tax
In Ukraine, property tax is imposed on both residential and non-residential real estate owned by individuals and legal entities. The assessment of the tax base is determined by the total area of the property, with local authorities establishing the tax rate, which can be as high as 1.5% of the minimum wage for each square meter of taxable property. The tax period corresponds to the calendar year, and payments are usually made on an annual basis.
Inheritance taxation
In Ukraine, the rates for inheritance tax are influenced by the connection between the deceased and the heir, alongside their residency status. Ukrainian residents who inherit from first-degree relatives, such as parents, children, or spouses, are subject to a 0% tax rate. In contrast, inheritances from other relatives incur a tax of 5%, and those from non-residents or for non-first-degree relatives face a tax of 18%. Furthermore, a military tax of 1.5% is levied on all taxable inheritance income.
International taxation
Ukraine’s international tax framework features a withholding tax (WHT) on payments to non-residents, set at a standard rate of 15%. This rate pertains to dividends, interest, royalties, and capital gains. However, reductions or exemptions may be available through double taxation treaties (DTTs) that Ukraine has established with numerous nations. The tax system also incorporates controlled foreign companies (CFC) regulations, transfer pricing rules that align with OECD standards, and anti-avoidance strategies like the principal purpose test (PPT).
Cryptocurrency taxation
In Ukraine, earnings from cryptocurrency transactions are subject to taxation. Individuals selling cryptocurrency pay a tax rate of 5% during a grace period of five years. Following this period, the tax rate increases to 18%, in addition to a 1.5% military tax. Businesses involved in cryptocurrency face a corporate income tax of 18%, although those that operate exclusively in crypto activities can benefit from a reduced rate of 5%. Taxes on transactions are calculated based on the profit made from the difference between the purchase and sale prices.
VAT system
Ukraine imposes a standard VAT rate of 20% on a majority of goods and services. There are lower rates of 7% applicable to medical drugs and products, while certain agricultural products have a 14% rate. Goods that are exported are subject to a zero rate (0%). The structure of Ukraine’s VAT system is comparable to that of the EU, where businesses collect VAT from their sales, known as output VAT, and can deduct VAT from their purchases, referred to as input VAT. VAT is self-assessed and submitted via electronic invoicing. Foreign companies that offer e-services to individuals in Ukraine need to register for VAT if their annual sales exceed UAH 1 million.
Our taxation solutions
In a tax landscape that is continuously changing, expert advice is essential. Our firm provides a range of specialized tax solutions to address the varied needs of individuals, corporations, and investors in Ukraine. Our services are crafted to help navigate the intricacies of the tax code, reduce liabilities, and guarantee complete regulatory compliance.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
Navigating the intricate realm of taxation can greatly benefit from professional guidance. Reach out to us today to arrange a consultation with our tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to Ukraine’s regulatory framework.
Disclaimer
Tax laws and regulations are continually evolving and can differ depending on personal circumstances. The information provided is intended for general guidance and may not represent the latest updates. It is strongly advised to seek assistance from a qualified tax professional for accurate and current advice tailored to your specific situation.