Navigating the tax landscape in Ukraine is a critical aspect for any employer operating within the country, or for foreign companies employing individuals there. The system involves contributions from both employers and employees, covering various social security benefits and income tax obligations. Understanding these requirements is essential for compliance and smooth payroll operations.
The Ukrainian tax system for employment is primarily based on the Personal Income Tax (PIT) and the Unified Social Contribution (USC). Employers are responsible for calculating, withholding, and remitting these taxes on behalf of their employees, as well as making their own contributions to the social security fund. Compliance involves adhering to specific rates, calculation bases, reporting deadlines, and understanding the nuances that may apply to different types of workers or entities.
Employer Social Security and Payroll Tax Obligations
Employers in Ukraine are primarily responsible for contributing to the Unified Social Contribution (USC), which funds various social insurance schemes including pensions, temporary disability, unemployment, and occupational accidents/diseases. The standard USC rate for most employers is applied to the employee's gross salary.
The standard USC rate for employers is 22% of the employee's gross salary. There are specific exceptions, such as a reduced rate for employees with disabilities (8.41% of the actual expenses for salary payment) or for certain types of income like remuneration under civil law contracts (22%). The maximum base for calculating USC is capped at a certain multiple of the minimum wage. For 2025, this cap is expected to be updated based on the minimum wage set for that year. Contributions are due monthly.
| Contribution Type | Rate | Base |
|---|---|---|
| Unified Social Contribution (USC) | 22% | Employee's Gross Salary (up to cap) |
| USC (Employees with Disabilities) | 8.41% | Employee's Gross Salary (up to cap) |
There are generally no significant regional variations in the standard USC rates across Ukraine.
Income Tax Withholding Requirements
Employers are required to withhold Personal Income Tax (PIT) and Military Tax from their employees' gross salaries and other taxable income. These taxes are deducted at source before the net salary is paid to the employee.
The standard PIT rate is 18% and is applied to the employee's gross income after any applicable deductions or allowances.
The Military Tax rate is 1.5% and is applied to the employee's gross income without any deductions.
Both PIT and Military Tax must be calculated and withheld by the employer each time income is paid to the employee (e.g., salary, bonuses, vacation pay). The total withheld amounts for both taxes are remitted to the tax authorities monthly.
| Tax Type | Rate | Base |
|---|---|---|
| Personal Income Tax (PIT) | 18% | Gross Income (less deductions/allowances) |
| Military Tax | 1.5% | Gross Income |
Employee Tax Deductions and Allowances
Employees in Ukraine may be eligible for certain tax deductions, primarily through the Social Tax Credit (STC). The STC reduces the base amount of income subject to PIT. To claim the STC, an employee must submit an application and supporting documents to their employer.
The standard STC amount is a percentage of the minimum wage established for January 1st of the reporting year. For 2025, this amount will be based on the minimum wage effective at the start of the year. The STC can generally be applied if the employee's monthly gross income does not exceed a certain threshold, which is typically a multiple of the minimum wage.
Specific categories of employees, such as single mothers, parents with multiple children, or individuals with disabilities, may be eligible for increased STC amounts. The employer applies the STC when calculating the monthly PIT withholding, based on the employee's valid application and eligibility.
Tax Compliance and Reporting Deadlines
Employers in Ukraine have specific reporting obligations regarding payroll taxes and PIT. The primary report is the Tax Calculation of Amounts of Income Accrued (Paid) in Favor of Taxpayers, and Amounts of Tax Withheld from Them, as well as Amounts of Accrued Single Contribution (often referred to as the "Tax Calculation" or "Unified Report").
This report consolidates information on PIT, Military Tax, and USC for all employees. It must be submitted to the tax authorities quarterly by the 40th day following the end of the reporting quarter.
Payment deadlines for withheld PIT, Military Tax, and accrued USC are generally monthly. Payments are typically due by the 20th day of the month following the reporting month. If salary is paid on specific dates, the tax payment deadline is usually within three banking days after the salary payment date.
Failure to comply with reporting and payment deadlines can result in significant penalties and fines.
Special Tax Considerations for Foreign Workers and Companies
Foreign individuals working in Ukraine are subject to Ukrainian income tax rules. Their tax status (resident or non-resident) determines the scope of their tax liability.
- Residents: Taxed on their worldwide income.
- Non-residents: Taxed only on their Ukrainian-sourced income.
Employers hiring non-resident foreign workers in Ukraine are generally required to withhold PIT and Military Tax from their Ukrainian-sourced income at the standard rates (18% PIT, 1.5% Military Tax). USC is also applicable to the salary of foreign employees working under employment contracts in Ukraine.
Double Tax Treaties (DTTs) between Ukraine and other countries can impact the taxation of foreign workers and foreign companies. DTTs aim to prevent double taxation and may provide for reduced tax rates or exemptions on certain types of income, depending on the specific treaty provisions and the individual's tax residency status. Foreign companies employing individuals in Ukraine without a registered presence may face challenges and complexities regarding their employer obligations, often necessitating the use of an Employer of Record to ensure compliance with Ukrainian labor and tax laws.
