The 10-10-10 Tax Reform Proposal

One of the most talked-about proposals is the 10-10-10 tax reform, inspired by Bulgaria’s simplified tax model. This ambitious plan would set personal income tax, corporate income tax, and VAT at a flat 10% each. This could streamline the tax system, curb the shadow economy, and make compliance easier for businesses. By reducing rates and complexity, Ukraine could attract much-needed investment and boost economic activity. Discussions in the Verkhovna Rada suggest this could take effect as early as 2026, but we consider this extremely unlikely. If implemented, businesses would need to recalibrate payroll calculations and tax reporting, potentially lowering costs but requiring new software integrations to handle the simplified structure.

Expansion of SAF-T UA Reporting

Another key change is the expansion of SAF-T UA reporting. Starting in 2025, large taxpayers must submit SAF-T UA (Standard Audit File for Tax) annually, with penalties of UAH 302,800 for non-compliance. By 2027, this requirement will extend to all VAT payers, except self-employed individuals, with fines of UAH 30,280 for violations. Draft laws indicate potential updates to the SAF-T UA file structure in 2026, aiming to enhance automated accounting and tax analysis. Businesses will need robust systems to meet these deadlines, likely increasing reliance on digital platforms like the E-cabinet.

Stricter and More Frequent Tax Audits

Tax audits are also set to intensify. After resuming in 2023, audits are expected to become stricter in 2026, with draft laws proposing monthly updates to audit schedules and a minimum two-month notice period. This shift aims to improve transparency but could increase compliance pressure, especially for payroll-related reporting. Companies should prepare for more frequent scrutiny of payroll taxes, such as the 5% military tax introduced in 2024 and monthly personal income tax reporting tied to “economic booking” initiatives.

Increases in Excise Taxes and Royalties

Excise taxes are another area of focus. The gradual 20% annual increase on tobacco products, aligning with EU Directive 2011/64/EU, is expected to continue through 2026. Additionally, proposed increases in mining royalties (e.g., UAH 700–1,400 per hectare for land tax) could affect businesses in extractive sectors.

Digitalization and Technological Advancements

Digitalization remains a priority. Upgrades to the State Tax Service’s E-cabinet and analytical tools are slated for 2026, promising faster payroll processing and compliance checks. However, these advancements may require businesses to invest in compatible software.

Preparing for Change

For businesses, these changes signal a need for agility. Partnering with local experts or outsourcing payroll to providers familiar with Ukraine’s evolving tax landscape can ensure compliance while freeing up resources to focus on growth. Staying informed and adaptable will be key as Ukraine’s tax system transforms.

Get in touch today to organise a consultation with a Ukrainian accounting expert and stay informed on the latest changes affecting you.

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Key Tax Changes

Military Levy Increase

The military levy, a critical source of defense funding, has increased from 1.5% to 5%, effective January 1, 2025, and will remain in place until martial law ends. This tax applies to various incomes, including:

• Salaries: Combined with an 18% personal income tax, the total deduction is now 23%.
• Individual Entrepreneurs: Group 1, 2, and 4 pay 10% of the minimum wage (~800 UAH/month); Group 3 pays 1% of income.
• Real Estate and Car Sales: Second transactions incur 5% personal income tax plus 5% military levy; third and subsequent transactions face 18% plus 5%.
• Rental and Financial Income: Subject to 18% personal income tax plus 5% military levy.

Exemptions include military personnel, mobilized entrepreneurs, and specific incomes like maternity payments. Payroll professionals must recalibrate systems to ensure accurate withholding and reporting.

Corporate Income Tax (CIT) Adjustments

The CIT rate for financial institutions (excluding insurers) has risen from 18% to 25% (State Tax Service). For Diia City residents, pension contributions and insurance payments for employees and gig specialists are exempt from the “tax on withdrawn capital.” Other changes include:

• Charitable contributions for defense by Diia City residents are not considered taxable.
• Aircraft manufacturing income tax exemptions have been discontinued.

Accounting teams must update tax computations and financial planning to reflect these changes.

Personal Income Tax (PIT) Modifications

For Diia City residents, a 5% PIT rate applies to specialist income from the month after acquiring resident status, with 18% for the acquisition month. If residency requirements are not met, the rate reverts to 18% for the last three months’ income. Additionally, tax agents must now submit monthly PIT calculations, shifting from quarterly submissions, which increases payroll reporting frequency.

Value Added Tax (VAT) Changes

Several VAT exemptions have been abolished, including those for:

• Aircraft manufacturing imports.
• Disability enterprise products.
• Air transport services (7% rate).
• Drone and equipment imports.

Businesses must now account for VAT on these transactions, requiring adjustments in financial reporting and compliance strategies (State Tax Service).

Other Notable Changes

• Transfer Pricing: New criteria for related-party transactions and an updated list of states/territories for transfer pricing purposes, with ownership thresholds increased from 20% to 25%.
• Excise Tax: Tobacco product excise rates are increasing annually until 2027, with new retail price requirements and clarified tax calculations.
• Land Tax: Exemptions for aircraft manufacturing entities have been removed.

These changes add complexity to compliance, particularly for businesses operating in specialized sectors like Diia City or tobacco.

Implications for Accounting, Tax, and Payroll Professionals

The 2025 tax reforms present both challenges and opportunities for professionals:

• Payroll Adjustments: The military levy increase requires payroll systems to be updated to handle higher deductions. Monthly PIT calculations add to administrative tasks, necessitating efficient reporting processes. Professionals should communicate changes to employees to manage expectations around net pay.
• Accounting Compliance: The CIT rate hike for financial institutions and the abolition of VAT exemptions demand revised tax planning and financial reporting. Accurate record-keeping is critical, especially with expanded audit grounds.
• Tax Advisory: Professionals must guide clients, particularly individual entrepreneurs and Diia City residents, on navigating new tax rates and exemptions. The universal filing requirement may also increase demand for employee support in tax declarations.

Preparation Strategies

To adapt to these changes, professionals should:

1. Update Systems: Ensure payroll and accounting software supports the new military levy rate, monthly PIT reporting, and updated CIT and VAT calculations.
2. Stay Informed: Monitor updates from the State Tax Service of Ukraine and consult professional networks for clarifications.
3. Invest in Training: Participate in workshops or webinars to understand the practical implications of the new tax rules.
4. Support Employees: Provide resources or guidance to employees on tax obligations, especially for individual entrepreneurs affected by the military levy.

Ukraine’s tax reforms are driven by the ongoing war and the need to fund defense efforts, as evidenced by the military levy increase. The changes also reflect a broader push toward tax modernization, with initiatives like Diia City aimed at fostering tech innovation. However, the increased tax burden, particularly for financial institutions and entrepreneurs, may raise concerns about economic competitiveness. The abolition of VAT exemptions could increase costs for industries like aircraft manufacturing, potentially affecting their operations.

The temporary nature of the military levy increase, tied to martial law, introduces uncertainty, as professionals must prepare for potential reversions or extensions. Meanwhile, the alignment with international standards, such as updated transfer pricing rules, positions Ukraine as a more transparent partner in global tax cooperation, potentially attracting foreign investment post-conflict.

Ukraine’s 2025 tax changes, including the military levy increase to 5%, the CIT hike for financial institutions, and the abolition of VAT exemptions, mark a significant shift for the accounting, tax, and payroll industries. These reforms, while necessary for state funding, require professionals to adapt swiftly to ensure compliance and support their organizations. By updating systems, staying informed, and providing employee guidance, accounting and payroll professionals can navigate this complex landscape and contribute to Ukraine’s economic resilience during challenging times.

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Introduction of Law No. 4113

On January 1, 2025, Law No. 4113 “On Amendments to the Tax Code of Ukraine and Other Laws to Stimulate the Development of the Digital Economy in Ukraine” comes into force. The law provides specific rules for applying a reduced personal income tax (PIT) rate of 5% and a minimum ESV contribution for Diia City residents, addressing both new residents and those who fail to meet residency requirements.

Preferential Taxation in the Month of Residency Acquisition

Personal Income Tax (PIT)

Diia City residents benefit from a 5% PIT rate for:

• Salaries,
• Remuneration under gig contracts, including compensation for creating and transferring rights to commissioned works, and
• Author’s remuneration for creating and transferring rights to official works.

However, residents lose the right to this reduced rate and must apply the standard 18% PIT rate if they fail to meet the following requirements:

• The average monthly remuneration for employees and gig specialists is at least €1200.
• The average number of employees and gig specialists is no fewer than nine.

These criteria are evaluated monthly, starting from the calendar month after obtaining Diia City residency. Previously, the 5% PIT rate applied from the subsequent month without legislative backing, which has now been resolved. From January 1, 2025, the PIT for earnings in the month of acquiring Diia City residency is taxed at 18%, with the 5% rate applying from the next calendar month.

Social Security Contributions (ESV)

Similar to PIT, the rules for ESV contributions have been clarified. The minimum ESV is applied if:

• The average monthly remuneration is at least €1200.
• The average number of employees and gig specialists is at least nine.
• There is no tax debt exceeding 10 minimum wages for more than 30 days.

From January 1, 2025, the minimum ESV contribution applies starting the month after acquiring residency. In the month of obtaining residency, the standard ESV rates apply.

PIT Adjustments for Non-Compliance

If a Diia City resident fails to meet the requirements for remuneration and the number of specialists in a given month, they must independently apply the 18% PIT rate. The calculation base includes all specialist incomes for that month. The additional PIT amount (18% – 5%) must be paid before submitting the tax declaration. This adjustment does not count as taxable income for the specialists.

Previously, discrepancies led to disputes with tax authorities, but the new law explicitly resolves this issue. Residents can deduct already paid 5% PIT from the 18% tax owed, avoiding overpayment.

Special Rules for Startups

Startups can gain Diia City residency even if they don’t meet the requirements for average remuneration or the number of specialists. This status is valid until December 31 of the year following the year they gained residency. During this period, startups are allowed to:

• Apply the 5% PIT rate if the average remuneration criterion is met, regardless of the number of employees.
• Pay ESV contributions at the minimum rate, provided other conditions are met.

After the grace period, if startups still fail to meet the requirements, they must independently pay the standard ESV and PIT rates. The additional amounts owed are calculated and paid for the preceding three months within the next calendar year.

Key Takeaways

1. Clarifications for Residents: Starting January 1, 2025, Diia City residents benefit from clear rules on applying preferential PIT and ESV rates.
2. Adjustments for Non-Compliance: PIT for months of non-compliance is adjusted, with deductions allowed for previously paid taxes.
3. Support for Startups: Startups have reduced obligations for a limited time, encouraging their growth within the Diia City ecosystem.

These changes aim to streamline taxation and social security processes, fostering the development of Ukraine’s digital economy under the Diia City framework.

The post Tax and Social Security Changes for Diia City Residents Starting in 2025 appeared first on Leinonen Ukraine.

Key Provisions of the Law:

1. 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.
2. 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.
3. 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.
4. 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.
5. Consumer Price Adjustments:
   • Minimum retail prices for wine, cognacs, and vermouth will increase by 50%.
6. 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.
7. 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.

The post Ukraine to Implement Tax Increases Starting December 1, 2024 appeared first on Leinonen Ukraine.

The new bill seeks to increase taxes by Hr 58 billion ($1.4 billion) in 2024 and Hr 137 billion ($3.3 billion) in 2025. These changes affect corporate and individual taxes, demanding close attention to how companies manage employee payroll deductions and overall financial planning.

One of the most notable changes is an increase in the military tax, rising from 1.5% to 5%. This adjustment affects not only employees but also self-employed individuals, with implications for both income taxes and payroll withholdings. From an accounting perspective, payroll systems must be updated to reflect this change, ensuring compliance with the new rates effective from Oct. 1 for certain income categories and Jan. 1, 2025, for others.

Additionally, companies in the banking sector will see profit taxes jump to 50% in 2024, while other financial institutions face an increase from 18% to 25% starting January 2025. This shift significantly affects financial forecasting and quarterly reporting, and firms must adjust their accounting practices accordingly to manage the elevated tax burden.

With Ukraine’s budget deficit projected at $35 billion for next year, the new tax measures aim to reduce reliance on foreign financing and generate internal funding through higher taxation. However, companies must navigate the financial strain imposed by these increases, taking steps to balance operational costs with the need to support the economy in challenging times.

The changes also underscore the need for enhanced financial planning as firms prepare for potential adjustments in domestic borrowing, job creation incentives, and wage policies. By integrating these taxation features into payroll and accounting systems now, companies can better prepare for 2025 and beyond, aligning their operations with Ukraine’s revised tax landscape.

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• Maintain information about the Ultimate Beneficial Owner (hereinafter referred to as UBO) or its absence, as well as the ownership structure;

• Submit information about the UBO or its absence, and the ownership structure for inclusion in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations (hereinafter referred to as the USR) in the manner specified by the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs, and Public Formations” dated May 15, 2003, No. 755-IV (hereinafter referred to as Law No. 755).

The Ministry of Justice will impose fines on legal entities that fail to submit information about the UBO or submit it late. The fines will range from UAH 17,000 to UAH 340,000 (Paragraph 4, Article 35 of Law No. 755). Additionally, the director or the person authorized to act on behalf of the legal entity will also be fined. The administrative fine will range from UAH 17,000 to UAH 51,000 (Part 6, Article 166-11 of the Code of Ukraine on Administrative Offenses).

Law No. 361 also obliges legal entities to keep information about the UBO and the ownership structure up to date.

If a government authority, law enforcement agency, primary financial monitoring entity (hereinafter referred to as PFME), or other person (if the information concerns such a person) discovers discrepancies between the information about the UBO and the ownership structure of the legal entity (including incompleteness, inaccuracies, or errors in the information about the UBO and/or ownership structure in the USR), they must notify the USR holder within 10 working days from the day the discrepancies are discovered (Article 5-1 of Law No. 361).

In turn, the PFME is required to notify the USR holder about any discrepancies found between the information obtained during proper verification and the information in the USR concerning the UBO and the ownership structure of the client (including incompleteness, inaccuracies, or errors in the information about the UBO or the ownership structure in the USR) within 10 working days from the day the discrepancies are discovered (Article 8 of Law No. 361).

The USR is maintained by the Ministry of Justice, which takes organizational measures to ensure its functioning.

The procedure for notifying the Ministry of Justice as the USR holder is defined by the “Procedure for Notifying the Holder of the Unified State Register About Discrepancies Identified by the PFME Between the Information Obtained During Proper Verification and the Information in the Unified State Register About the UBO and/or the Ownership Structure of the Legal Entity” (Order of the Ministry of Justice dated July 12, 2023, No. 2542/5; hereinafter referred to as the Notification Procedure).

By the Order of the Ministry of Justice “On Amendments to the Order of the Ministry of Justice of Ukraine dated July 12, 2023, No. 2542/5” dated March 18, 2024, No. 727/5, the implementation of the Notification Procedure has been postponed until September 1, 2024.

After the Order of the Ministry of Justice dated July 12, 2023, No. 2542/5 comes into force, a section titled “Notification by the Holder of the Unified State Register About Discrepancies Identified by the PFME Between the Information Obtained During Proper Verification and the Information in the Unified State Register About the UBO and/or the Ownership Structure of the Legal Entity” will be created on the official website of the Ministry of Justice, where the encryption certificate and email address provided in Paragraph 7 of the Notification Procedure will be posted.

The Ministry of Justice has approved the procedure for holding individuals accountable and determining the amount of fines for violations in the field of state registration of legal entities by Order dated September 13, 2023, No. 3258/5.

This procedure will be used by the Ministry of Justice when holding individuals accountable for violations specified in Paragraph 4 of Article 35 of Law No. 755.

The post From September 1st, Inaccurate Information on Ultimate Beneficial Owners in the Unified State Register Will Be Fined appeared first on Leinonen Ukraine.

Why open a company in Ukraine?

 Although Ukraine is currently engaged in a war on its Eastern borders and the security situation is unstable, it remains a potential market for investors that are able to operate considering the risks. Right now, investors are positioning to support Ukraine in its rebuilding efforts once the war ends and new possibilities open. For many, this means establishing small-scale operations and legal entities with small staff in order to prepare for larger investments once the security situation allows business to normalize. Establishing a company in Ukraine may take 1-3 months due to the paperwork involved, so many consider establishing a legal entity already at this time to prepare for the future. It is likely that once the war ends there will be a rush of foreign investors coming into the country, so it may be wise to stay ahead of this development. 

At the moment, many international organizations are supporting investment projects into Ukraine via grants and loans with preferred conditions. Additionally, businesses may consider supplying goods to Ukraine via the many procurement projects that the Ukrainian government is publishing and supporting with public funds. 

The Western parts of Ukraine and cities such as Lviv that are located there, are safer than the middle regions and especially the Eastern parts of the country. Businesses also take this into account when planning their operations. Electricity outages are an important consideration for businesses country-wide, and due to them it is very challenging to arrange profitable operations for companies that require a lot of electricity in for example production activities. 

How to open a new business in Ukraine?

Before undertaking business activity in Ukraine, it is necessary to choose which type of legal entity you need, and then to create the entity. The type of the legal entity will influence all the activity of the company, from tax procedures to customs declarations, same as in almost all other countries. Most commonly investors choose to establish a Limited Liability Company or LLC, which enables you to do business without limitations. Starting a company in Ukraine usually takes approximately 1-3 months, for more information we recommend to read our article about company formation with the steps to establish a new business included.

Accounting & Taxation

Accounting and Payroll in Ukraine

Accounting and payroll in Ukraine are legally much the same as in more developed European markets, but in practice a lot of nuances have to be taken into account. The accounting practices in Ukraine are governed by the Law on Accounting and Financial Reporting since the year 2000. This law states that IFRS should override local accounting standards, but in practice there are many differences between the two. The fiscal year begins on January 1st and ends on December 31st, i.e. it is always the calendar year.  

Recently, Ukraine has moved away from the traditional accounting software 1C because it is a Russian-originated software. Nowadays, a software called BAS is the most commonly used accounting software in Ukraine. The BAS solution is based on the same technology as 1C and is similar in its functions. 

What are the controlling institutions?

The regulatory body for accounting is the Ministry of Finance. For tax payments, companies are controlled by the State Fiscal Service of Ukraine. Payroll taxation and employees’ rights are monitored by the State Labour Inspectorate.

Tax rates in Ukraine

Corporate income tax – 18 % 
VAT – 20 % 
Social security contributions (payroll tax) – 22 % 
Personal income tax – 18 % (additionally a 1,5 % military tax is currently levied, and the military tax may be raised to 5 % in the near future.) 
 
These are the basic tax rates that apply to normal limited liability companies and people in Ukraine. There are many exemptions to these numbers, for example private small entrepreneurs generally only pay 5 % tax. Many foreign companies use such private entrepreneurs for outsourcing, especially in the IT field. In these cases an accounting partner usually takes care of the PE registrations, international invoicing and tax payments, in essence taking care of the payroll and administration responsibilities. 
 
Standard VAT rate is 20 %. Export of goods VAT is 0 %, for services it can be 0 or 20 % depending on the place of receiving services, place of registration of the recipient etc. Import of goods and services to Ukraine is subject to 20 %VAT and customs duties. 

Interesting facts about accounting and payroll in Ukraine

Ukraine uses an electronic document platform for accounting and payroll documents. This means that most of the documentation necessary when doing accounting and payroll may be handled and stored electronically. This is a development that has become reality during the past 5 years, before which a lot of paper documentation was still used. Even nowadays if your counterparty is not using the electronic documentation platform, it will be necessary to exchange paper documentation with them. Additionally, agreements, especially cross-border agreements, need to be signed in wet ink most of the time. Banks may require to see original documents supporting international money transactions. 
 
Ukraine is a very popular outsourcing market for IT services in particular. The legislation allows foreign companies to purchase services from local private entrepreneurs in such a way that resembles having the entrepreneurs on the foreign company’s payroll. 

How often do I have to report?

Monthly:  VAT report, Report of Unified Social Insurance Contributions, specific statistical reports 
Quarterly:  Financial statements, personal income tax reports, CIT reports  
Annually:  Financial statements, CIT report. 

How often will the government audit me? 

The government performs scheduled on-site tax audits of companies which are listed on the audit plan of the relevant tax office. This list is published online, so companies can check if they are on it. Unscheduled tax audits are performed in case the target company violates some statute of the tax law, e.g. fails to file a tax return. 
 
Some types of companies face mandatory audits, for example JSCs, banks, issuers of securities, financial institutions and insurance companies. 

Are tax authorities strict regarding the Accounting and Payroll regulations?

 Yes, they are. Checks by the tax authorities and especially audits during VAT returns have become more common during the martial law period. This is a fact that companies operating in Ukraine have to take into account. Many minute details have to be taken into account when doing accounting, as it is very easy to break the rules. A professional and accurate accountant is the best way to minimize risks when it comes to government audits and checks. 

Unfortunately foreign companies especially may sometimes face harassment from the tax authorities, however this is occurring less and less in recent years. 

Employment

The regulation of employment in Ukraine is governed by the Labor Code of Ukraine, which applies equally and must be complied with by both the executives and the employees. Ukrainian labour laws apply to foreign nationals and foreign businesses in Ukraine in the same manner as to domestic entities. All regulations related to minimum guarantees, employment benefits and compensation supersedes any agreement between the employer and employee. In general, the Ukraine labour law is protective of the employee. 

Expats are liable to pay resident Ukrainian taxes and social charges only if they stay in the country at least 183 days during a calendar year. Your employer will typically arrange for your registration with the Ukrainian tax office and secure your tax number. Self-employed workers will need to arrange their tax registration and Ukrainian tax number themselves. Ukrainian social security payments are deducted from your gross salary by the employer. 

In the condition of an employer-terminated agreement as a result of redundancy or liquidation, two months’ notice is given along with a two months’ salary severance payment to the employee. 

Termination of the employment agreement by the employee may be carried out by providing two weeks’ written notice to the employer, which is a basic right under the Labor Code that cannot be overridden by contractual terms. 

Being an Expat

An investor looking to start a company in Ukraine may want to consider moving here to manage their company. In this case they must first start their company so that they have the company’s registration certificate, and after that apply for a work permit. The work permit entitles them to receive an entry visa into Ukraine, and afterwards apply for a three year work visa and residence permit. This process is somewhat cumbersome but easily done with the right help. For most countries’ citizens, it is also possible to visit Ukraine visa-free for a maximum of 90 days per each 180. 

Ukraine is a nice but challenging place to live due to the war ongoing. Travel is only possible via land borders, and takes a long time. Foreigners should consider that currently Western Ukraine is a safer place than Kyiv and especially the Eastern parts of the country. Consequently, the Western parts such as Lviv are also more expensive to live and stay in. 

A foreign national who is living or working in Ukraine for more than 183 days in a calendar year is obliged to pay taxes and contributions towards the Ukrainian social security system. Usually double taxation can be avoided but this should always be checked on a case-to-case basis. 

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How to Join the “White Business Club”

To be included in the List of Taxpayers with a High Level of Voluntary Compliance (the List), you must meet both general requirements and additional criteria specific to your taxation system.

General Requirements:

1. Tax debt and/or other controlled payments do not exceed 3000 UAH and are less than 30 days old.
2. No arrears in social security contributions.
3. Compliance with criteria outlined in the Tax Code.
4. No breaches in tax obligations regarding reporting and documentation.
5. No tax notices for export/import violations in the last 12 months.
6. Not identified as a risky VAT payer.
7. No ongoing liquidation or bankruptcy proceedings.
8. No sanctions applied under Ukrainian law.
9. No connection to an aggressor state against Ukraine.
10. No changes in primary economic activity in the last 12 months.

Additional Criteria by Category:

1. Legal Entities on General Taxation:
   • Corporate tax payments meet or exceed industry averages over the last four quarters.
   • VAT payments meet or exceed industry averages.
   • Average monthly salary meets or exceeds industry averages by 10%, with a minimum of 5 employees.
2. Residents of Diia City:
   • Total tax payments meet or exceed Diia City resident averages.
3. Legal Entities on Simplified Tax System (Third Group):
   • Total tax payments meet or exceed industry averages over the last four quarters.
   • Average monthly salary meets or exceeds industry averages by 10%, with a minimum of 5 employees.
4. Legal Entities on Simplified Tax System (Fourth Group):
   • Difference between total minimum tax liability and total paid taxes is negative.
   • VAT payments meet or exceed industry averages.
   • Average monthly salary meets or exceeds industry averages by 10%, with a minimum of 5 employees.
   • Land ownership/rental meets specified minimums and taxes are paid accordingly.
5. Self-Employed Individuals on General Taxation:
   • VAT and personal income tax payments meet or exceed industry averages.
   • Average monthly salary meets or exceeds industry averages by 10%.
6. Self-Employed Individuals on Simplified Tax System (Third Group):
   • Declared income exceeds 5 million UAH.
   • Total tax payments meet or exceed industry averages.
   • Average monthly salary meets or exceeds industry averages by 10%.

Newly registered taxpayers can be included in the List from the first day of the month following a full calendar year after registration.

List Publication and Information

The State Tax Service (STS) will form and approve the List by the last working day of March, May, August, and November, publishing it on the official STS website within 15 working days. The first List is expected by September 20, 2024.

The List will include:

• Name for legal entities.
• Full name and tax number or passport details for individuals.

Taxpayers can opt out of having their information published by notifying the STS.

Special Tax Administration for List Members

1. No Inspections:
   • No factual inspections related to fuel storage for own needs.
   • No unplanned document inspections except under specific conditions (e.g., transfer pricing control, certain taxpayer activities).
2. Shortened Verification Periods:
   • Cameral and documentary verifications within 5 and 10 working days for VAT refund claims.
3. Exclusive Tax Consultations:
   • Individual tax consultations provided by the central STS within 15 calendar days.
4. Dedicated Compliance Manager:
   • A designated STS official for interaction, available for consultations and video conferencing.
5. Tax Information Requests:
   • Taxpayers can request information about tax risks and receive guidance on mitigating them within five days.

Worker Reservation Benefits

The Verkhovna Rada recommends that the government amend the Order of Reserving Conscripts during Martial Law to allow taxpayers on the List to reserve up to 25% of their conscripted employees. Further decisions from the Cabinet of Ministers are awaited.

Conclusion

Joining the “White Business Club” offers significant advantages, including reduced inspections, quicker verification processes, dedicated support, and the ability to reserve a portion of your workforce during martial law. Ensure compliance with the stringent criteria to benefit from these privileges.

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The recent Resolution No. 56 by the National Bank of Ukraine marks a significant relaxation of currency restrictions, representing the most extensive easing since the onset of the Russian Federation’s invasion of Ukraine.

Key alterations include:

1. Dividend Payments: Effective May 13, 2024, Ukrainian companies can disburse dividends to non-residents, capped at EUR 1 million monthly from profits accrued since January 1, 2024. However, dividends generated before this date remain inaccessible.
2. Import Payments: Authorization for the settlement of all imports of goods and services.
3. Foreign Currency Loan Servicing: Businesses can now remit loan interest abroad, limited to EUR 1 million quarterly or 12% annually. The prerequisite period for interest payments has been shortened from 3 years to 1 year.
4. Leasing and Rental Payments: Unrestricted payments under leasing and rental contracts, extending beyond vehicle-related agreements.
5. Fund Transfers by Foreign Airlines and Card Payment Systems: Representative offices of foreign airlines and international card payment systems can transfer funds to parent companies, with a ceiling of EUR 5 million monthly.

These adjustments, effective from May 4, 2024, except for dividend distribution which commences on May 13, 2024, signify a large shift in the banking regulations which will make it easier for foreign business to operate in Ukraine.

For any additional questions, please contact us.

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If an international treaty, approved by the Verkhovna Rada of Ukraine, has rules different from those in the Tax Code of Ukraine (TC), the treaty’s rules take precedence (clause 3.2 of the TC). Ukraine’s Constitution recognizes such treaties as part of national legislation (Article 9 of the Constitution). 

The international treaty rules exempt income sourced in Ukraine from taxation, reduce the tax rate, or refund the difference between the paid tax and the amount the non-resident owes under the treaty (Article 103 of the TC). The Ukrainian Law No. 360 ratified the Framework Agreement between the Government of Ukraine and the Commission of the European Communities, signed in Brussels on December 12, 2006. According to Article 3 of the Framework Agreement, projects funded by Community funds are not subject to various taxes and fees in Ukraine, including VAT. Contracts financed by the Community are exempt from VAT, stamp duties, registration fees, or similar charges in Ukraine, irrespective of the parties’ origin. If the contract involves goods from Ukraine, it must be based on prices excluding value-added tax. “Goods” include any product, service, and/or rights for sale. The term “contract” in clauses 3.2-3.7 of Article 3 refers to a written agreement between the Commission of the European Communities and a legal entity or individual, made to implement a foreign aid project (program) funded by the European Community (Law No. 360). 

Therefore, if the non-resident represents the Commission of the European Communities, the due diligence services provided under the contract are not subject to VAT. 

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