Bill on Raising Taxes Has Been Adopted

The Verkhovna Rada of Ukraine adopted in its second reading the Draft Law No. 11416-д on amendments to the Tax Code of Ukraine regarding the peculiarities of taxation during martial law, which has been actively discussed by the public and the business community over the past few months.

The main changes introduced in connection with the adoption of the law are the following:

Increase in the rate of military tax on the income of individuals from 1.5% to 5%

This norm will be entering into force in several stages. From the date of entry into force of the Law, the military levy will increase for the income of individuals in the form of wages.

The military levy at the rate of 5% on other income (in particular, dividends, income from property sales, property rental, income from securities, foreign and other income) must be paid starting from January 1, 2025.

The military tax rate remains at the level of 1.5% for servicemen and employees of the Armed Forces of Ukraine, the Security Service of Ukraine, the Foreign Intelligence Service, the State Security Service, the National Guard, the State Border Guard Service, the Department of the State Guard, the State Special Communications Service, and the State Special Transport Service.

Introduction of a military levy for taxpayers of a single tax on a simplified taxation system

The military levy rate for Group 3 single tax payers is set at 1% of income.

The income of such payers will be taxed according to the new rules, starting from the first day of the first month of the calendar quarter in which the law enters into force. Therefore, with a high probability, all incomes of the Group 3 single tax payers for the IVth quarter will be subject to taxation by the military levy.

Additionally, a military levy is introduced for individual entrepreneurs who are in Groups 1, 2 and 4 of the single tax, in the amount of 10% of the minimum wage established by law on the first day of the current month (as of October 11, the amount of the levy will be UAH 800).

At the same time, the mentioned IEs have to pay the military levy for the period from October 2024.

It is worth noting that the changes related to the military levy will be in effect until the end of the year in which martial law is abolished or terminated.

Submission of monthly reporting on personal income tax (PIT), military duty and single social contribution (SSC) by all tax agents

Currently, such reporting is submitted quarterly. This innovation will enter into force on January 1, 2025 and indicates the legislator is developing the prerequisites for the introduction of economic reservation, based on the level of the employee’s salary.

Increase of the minimum tax liability (MTL) for agricultural producers

The law envisages a change in the procedure for calculating the MTL. The minimum amount of this obligation is set at the level of UAH 700 per hectare, and for land plots in which the share of arable land is at least 50%, UAH 1400 per hectare.

Changes in taxation of banks and financial institutions

In 2024, banks will have to pay 50% income tax, i.e. retrospectively.

Financial institutions (except insurers) will pay a tax of 25% of profits starting January 1, 2025 (the current tax rate is 18%).

Establishing monthly income tax advance payments for gas stations

Following the introduction of the Law, the fixed tax to the state budget will be paid to gas stations in advance separately for each fuel retail location, regardless of the amount of future profit. If the paid advance exceeds the amount of the accrued tax liability, the amount of such excess shall not be included in the reduction of tax liabilities of subsequent periods. In addition, the paid advance is not returned to the taxpayer as an excess or mistakenly paid tax liability and may not be credited against other taxes and fees.

The Law enters into force on the day following its publication, except for certain clauses that will come into effect in 2025.

The government predicts that changes to the tax legislation will bring an additional UAH 58 billion to the budget already this year, and UAH 137 billion next year.

However, representatives of the Ukrainian business community are convinced that the introduced changes will not lead to the expected economic results without systemic changes in budget expenditures towards their reduction (where they are applicable), targeted program measures for economic development, and the fight against corruption.

We are waiting for the full text of the Law, signed by the Chairman of the Verkhovna Rada of Ukraine, for familiarization with all the adopted changes.