Employers have several tax responsibilities in Ukraine. These include the Unified Social Contribution (USC), Personal Income Tax (PIT), and Military Tax.

Unified Social Contribution (USC)

Employers are required to pay the USC on employee salaries. The standard rate is 22% of the employee's gross salary.

Personal Income Tax (PIT)

Employers are also responsible for withholding PIT from employee salaries and remitting it to the tax authorities. The standard PIT rate is 18%.

Military Tax

In addition to the USC and PIT, employers must withhold a 1.5% military tax from employee salaries.

Payment Deadlines

Taxes withheld from employee salaries, such as the PIT and military tax, must be paid to the tax authorities on the same day the salary is paid. The USC, on the other hand, must generally be paid by the 20th of the month following the month in which the salary was paid.

Registration

Employers are required to register as taxpayers with the Ukrainian tax authorities. This registration process can usually be completed online.

In Ukraine, there are several types of taxes that are deducted directly from an employee's salary. These include the Personal Income Tax (PIT), the Military Tax, and the Unified Social Contribution (USC).

Personal Income Tax (PIT)

This is an income tax on an individual's earnings. All employees earning income in Ukraine are eligible for this tax. Ukraine uses a flat PIT rate of 18%. This tax is withheld directly from the employee's salary by the employer.

Military Tax

This is a temporary tax supporting Ukraine's defense efforts. All employees earning income in Ukraine are eligible for this tax. The military tax is a flat rate of 1.5% withheld from the employee's salary.

Unified Social Contribution (USC)

Although the USC is a mandatory social security contribution, it is paid by the employer and not deducted from the employee's salary. However, it's important to understand that it affects the overall cost of employment. The standard USC rate is 22%.

The standard VAT rate in Ukraine is 20%, which applies to most supplies of services within the country. However, certain services are zero-rated for VAT, meaning no VAT is charged on those services, but the supplier can still claim input VAT credits for related expenses. These zero-rated services include the export of services, international transportation services, and specific educational, healthcare, and cultural services.

Zero-Rated Services

• Export of services
• International transportation services
• Specific educational, healthcare, and cultural services

On the other hand, some services are exempt from VAT. This means that no VAT is charged, and the supplier cannot claim input VAT credits on related expenses. Exempt services may include financial services, insurance services, and letting of residential property under certain conditions.

Exempt Services

• Financial services
• Insurance services
• Letting of residential property (under certain conditions)

Regarding VAT filing procedures, businesses exceeding the VAT registration threshold (currently 1 million Ukrainian Hryvnia in annual taxable turnover) must register for VAT with the State Tax Service of Ukraine. VAT returns are generally filed monthly (quarterly for smaller taxpayers), and payments are due by the 20th of the following month. Filing and payments are submitted through the tax authority's electronic system.

VAT Filing Procedures

• Registration: Businesses exceeding the VAT registration threshold must register for VAT with the State Tax Service of Ukraine.
• Filing and Payment: VAT returns are generally filed monthly, and payments are due by the 20th of the following month.

Businesses providing taxable services can generally claim credits for VAT paid on inputs related to the provision of those services. There are also simplified VAT regimes available for small businesses.

Important Notes

• Input Tax Credits: Businesses providing taxable services can generally claim credits for VAT paid on inputs.
• Special Regimes: There are simplified VAT regimes available for small businesses.

Businesses can take advantage of several tax incentives to reduce their tax liability. These incentives are designed to encourage business growth, stimulate investment in certain sectors, and promote economic development.

Profit Tax on Reinvested Earnings

Businesses can defer payment of Corporate Income Tax (CIT) on profits that are reinvested in the business for a specific period. This incentive applies to various sectors, including manufacturing and agriculture.

Special Tax Regime for IT Companies ("Diia City")

Qualified IT companies can benefit from a reduced profit tax rate of 9% instead of the standard 18% under a special regime known as "Diia City".

Tax Exemptions for Investments in Priority Areas

Exemptions or reduced CIT rates may apply to investments in priority sectors designated by the government, such as renewable energy or high technology.

Import Duty and VAT Exemptions

Businesses operating in designated industrial parks or free economic zones may be eligible for exemptions on import duties and VAT for imported equipment.

Exemption from Land Tax

New investment projects may qualify for a temporary exemption from land tax payments.

Reduced Profit Tax Rate for Small Businesses

Small and medium-sized enterprises (SMEs) can benefit from a reduced profit tax rate under a simplified taxation system.

Qualification Criteria

Specific incentives target particular sectors deemed crucial for economic development. Certain benefits require a minimum investment threshold. Some incentives may be linked to creating a specific number of new jobs. Benefits may be available for businesses operating in designated zones or regions.

Application Process

Identify relevant incentives through resources like UkraineInvest and the State Tax Service of Ukraine. Consider seeking professional guidance from tax advisors or legal professionals to navigate the application process. Applications for specific incentives may involve submitting documents to relevant government agencies based on the incentive program.