Tax reform in Ukraine 2016

Below here you can find information of most significant changes:

Tax reform in Ukraine 2016

Income tax

The rate remained at 18% and the calculation has not drastically changed.

Up-front fees remain with the payment of dividends.

Innovation – quarterly reporting period for companies with revenue of more than 20m UAH.

Value Added Tax

Rates are still the same: 20%, 7% (medicine and medical supplies), and 0%. The list of transactions subject to zero rate tax remains unchanged. There are a number of changes in the operations of the tax-exempt, in particular the supply and export of grain and industrial crops is no longer exempt.

Good news – from January 1, excludes the possible cancellation of VAT registration on the basis of the lack of records in the Ukrainian State Register for the legal entity.

Personal Income Tax, Unified Social Insurance and Military Tax Contribution

The most important change is the introduction of a single rate of personal income tax of 18% instead of the previous two tier rates of 15 and 20%. 

The unified social insurance contribution rate was unconditionally cut to 22% regardless of the class of professional risk.

The maximum salary for the calculation of unified social insurance contribution has increased from 17 to 25 times minimum wage for able-bodied persons (п. 4 ч. 1 ст. 1 Закона о ЕСВ).

At a rate of 18% levied on most other types of income, including passive income such as dividends from non-payers of income tax (пп. 167.5.1 ПКУ), but if you received dividends from an income tax payer then the rate is 5% (пп. 167.5.2 ПКУ).

15% Tax rate is established from 1 January (on amount above 3 times minimum wage) for pensions, monthly cash allowance from the Pension Fund or the state fund.

0% Tax rate is mainly used for object inheritance.

From 1 January an individual taxpayer is no longer required to file a separate annual tax return on income received from salary and payments from Civil Contracts from two or more sources and if the revenue exceeds 120 times minimum wage in the reporting year

Military tax contribution 1,5% remains unchanged for 2016

Unified Tax

The calculation for unified tax payer groups I & II remains unchanged from 2015.

Changes into unified tax regulations will impact on only two groups of unified tax payers, individuals and legal entities (the so-called 3rd category), and those working in the agrarian sector (the so-called 4th category):

• The maximum income of unified tax payers in the third category is decreased from UAH 20 million to UAH 5 million;
•  At the same time, the rates of unified tax for this group were increased from 2% to 3% (plus VAT) and from 4% to 5% (VAT included);
• Rates of unified tax for agrarians were increased by 1.8%

Unified social Insurance contribution will be 303.16 UAH per month.

Application of registrars settlement operations also remained unchanged: for I group single tax payers it is not required, and for group II-III it is mandatory only if their annual income (both cash and non-cash) exceeds 1m UAH. If the income of an individual entrepreneur exceeds the specified amount, the use of registrars settlement operations at cash calculations will be required.

Excise tax

The main innovation here is that the electronic system for VAT administration will be implemented for fuel sales from 1 April 2016 following a one month trial period starting 1 March 2016.

Tax Administration

If the tax authority has unilaterally terminated the contract on the recognition of electronic documents, then the tax payer is entitled to submit statements on paper personally or by mail.

Entrepreneurs in rural areas are permitted to pay taxes and fees directly to the registrar of settlement operations for rural (village) councils.

Introduction of new penalties:

– for failing to pay an agreed tax notice – from 10 to 100% of the amount of excise specified in the notice;

– for failing to meet submission deadlines for excise invoices/payments and adjustments to invoices already in the Unified Register – from 2 to 40% of the amount of excise tax;

– for failure to submit excise invoice / calculating the adjustment in the Unified Register of excise invoices for more than 120 days – 50% of the excise tax.

The last two penalties will be charged when the electronic system for fuel excise management is implemented.

Property Tax

Limitation on property tax set by local councils is increased by 1% to 3% of the minimum wage. Dimension benefits have not changed – 60 sq m. for apartments and 120 sq m. for houses. Less lucky are the owners of large properties: apartments over 300 sq m. and houses more than 500 sq m. for each such object will have to pay an additional 25000 UAH per tax year and local councils are not entitled to offer exemptions.

Car tax

Previously tax was levied on used cars up to 5 years old and had a displacement of 3000 cc. Now cars not older than five years and with an average market value more than 750 times minimum wage (1033500 UAH) will be taxed by 25000 UAH per year.