As companies adapt to new taxation measures introduced in Ukraine, they must account for significant changes in tax regulations, impacting accounting and payroll processes. The Ukrainian parliament recently passed a bill on Oct. 10, targeting a substantial increase in tax revenue to mitigate the country’s budget deficit amid the ongoing conflict.
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 2024 and beyond, aligning their operations with Ukraine’s revised tax landscape.
