Ukraine’s new tax reform law, officially titled the “Law of Ukraine on Amendments to the Tax Code of Ukraine on Features of Taxation During Martial Law” (No. 4015-IX), will take effect on December 1, 2024. This legislation introduces significant changes to tax rates and reporting requirements to bolster national defense funding and adapt taxation to wartime needs.
Key Provisions of the Law:
- Military Tax Increases:
- The military tax rate for employed individuals will rise from 1.5% to 5%, except for military personnel and certain government agencies, who will continue to pay the existing 1.5% rate or remain exempt during combat missions.
- Individual entrepreneurs (FOPs) in the first, second, and fourth tax groups will now contribute 10% of the minimum wage as of January 1 of the reporting year. For most FOPs, these obligations will begin January 1, 2025, pending parliamentary approval.
- Business Contributions:
- Starting October 1, 2024, FOPs and businesses in the third group of the unified tax system will pay a 1% military tax on their income.
- Businesses will face an increased corporate profit tax of 50% for banks and higher rates for financial institutions starting in 2025.
- Special Levies:
- Fuel station operators will pay monthly advance taxes between UAH 30,000 and UAH 60,000 per station.
- Mining levies on gravel, sand, and kaolin will see a rate increase.
- Agricultural and Land Tax Adjustments:
- A 14% increase in the minimum tax obligation for agricultural lands, setting a minimum of UAH 1,400 per hectare for arable land.
- Simplified tax system participants in the fourth group risk losing privileges if they have tax arrears exceeding two quarters.
- Consumer Price Adjustments:
- Minimum retail prices for wine, cognacs, and vermouth will increase by 50%.
- New Reporting Structures:
- Starting January 2025, taxpayers must file monthly combined reports for personal income tax, military tax, and unified social contributions, transitioning from quarterly reports.
- Tax Relief Measures:
- Funds from the “National Cashback” program and foreign aid received by citizens under temporary protection abroad are exempt from income tax.
This comprehensive tax overhaul aims to strengthen Ukraine’s financial resilience during ongoing martial law while addressing economic pressures. Critics and businesses have expressed concerns about the financial burden, while government officials emphasize the necessity of these measures to ensure economic stability and national defense funding.
