CIT in Ukraine is taxed at the flat rate of 18%. Taxable profit is calculated as financial profit before tax (reported in P&L statement according to Ukrainian GAAP or IFRS) adjusted by certain tax adjustments (depreciation, accruals and provisions, thin capitalization, tax losses, etc.). Thin capitalization rules apply to loans granted by non-resident related parties (debt-to-equity ratio is 3.5). Insurance companies are liable to pay additional 0% or 3% income tax for life insurance and other insurance respectively. Tax losses can be carried forward with no limitation period, while loss carryback is not permitted.
Companies with annual income not exceeding UAH 20 million (approximately EUR 631 thousand as of 1 January 2019) are entitled not to make any adjustments (except for tax losses carryforward). Companies with annual income not exceeding UAH 3 million (approximately EUR 95 thousand as of 1 January 2019) may apply 0% CIT rate, if certain additional conditions are met.
There is 15% withholding tax on dividend, interest, royalty, etc., paid to a foreign company. However, in most cases a lower rate or exemption may be applied under the respective double tax treaty. Ukraine has a wide double tax treaty network with more than 70 countries.
TP rules in Ukraine apply not only to controlled transactions with related non-resident parties, but also to transactions with non-related non-resident companies, which are registered in low-tax jurisdictions or which are considered as non-payers of CIT. Ukraine has not yet adopted country-by-country and masterfile reporting standards in local legislation.
|Transfer pricing in Ukraine|
|Arm's length principle||since 2013|
|Documentation liability||since 2013|
(applicable for large taxpayers)"
|Country-by-Country liability||since 2018|
|lack of report||up to 1% of the value of controlled transactions, but not more than UAH 580,800 (app. EUR 18,310)|
|lack of documentation||up to 3% of the value of controlled transactions, but not more than UAH 387,200 (app. EUR 12,210)|
|tax shortage||"25% of tax underpayment; 50% in case of recurrent violation during 1095 days + late payment interest"|
|Related parties||20% <||Direct or indirect or common control; or control in practice independently from the ratio|
Level of attention paid by Tax Authority:
*Bilateral and multilateral APAs
Sole traders, companies with annual income not exceeding UAH 5 million (approximately EUR 158 thousand as of 1 January 2019) and agricultural producers may apply for a simplified taxation system (paying single tax instead of CIT).
Property tax, which consists of real property tax and land tax, is charged as a local tax in Ukraine, and respective tax rates are set by local authorities.
Starting from 2020, it supposed that the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) will limit tax benefits granted by most treaties to which Russia is a party. Russia has chosen PPT and S-LOB (simplified LOB) rules, which will be applied if the Russian company paid out passive income.
There are many profits tax incentives in Russia in regard of some companies’ activities: federal and reginal tax incentives as well as incentives related to the defined industries (for example, medical or educational activity).
As non EU member, Ukraine does not comply with EU VAT Directives. Standard VAT rate is 20% (7% for supply of pharmaceuticals and medicinal products; 0% for export of goods).
There is no concept of B2B and B2С services in Ukraine. Under the general rule, the place of the supply of services is the place where the supplier is registered. However, there are some exceptions (e.g. for consulting, marketing, information services, etc.). In respect of services provided by a non-resident, the reverse-charge mechanism is applicable.
Ukraine introduced the electronic VAT administration system in 2015. Taxpayer is entitled to issue VAT invoices for the amount within the certain cap. To get VAT credit a taxpayer should receive from the supplier a VAT invoice in electronic form, which is registered in the Unified Register of VAT invoices. VAT refund is provided under unified register with chronological order of repayment.
There are number of temporary VAT incentives, such as VAT exemption for supply of certain goods and services (software, electric vehicles, equipment for renewable energy production, waste and scrap metals etc.) or possibility to defer VAT payment on certain transactions (e.g. import of equipment).
|VAT options in Ukraine|
|VAT group registration||No|
|Import VAT deferment**|
|Local reverse charge||Imported services|
|Option for taxation|
|Option for taxation - letting of real estate|
|Option for taxation - supply of used real estate||No|
|VAT registration threshold**||EUR "Revenue of UAH 1 million (app. EUR 31,530)"|
* For certain types of operations (e.g., construction works; supply of heat, water, gas to individuals or governmental agencies)
** Possibility to pay VAT on import of certain equipment by monthly instalments for up to 2 years
** Voluntary registration is allowed without any limitations
The other indirect tax in Ukraine is excise tax. The excisable goods are spirits, beer, tobacco, petroleum, cars, trailers, motorcycles, electricity.
PIT rate applicable to both active income (e.g. employment, benefits in kind, assignment fee) and passive income (e.g. interest, royalties, investment income) for residents and non-residents is 18%. Tax residents of Ukraine pay PIT on their worldwide income. Non-residents pay PIT on their Ukrainian source income. Dividends are subject to 9% PIT, except for dividends distributed by Ukrainian CIT payers, which are subject to 5% PIT. For the specific types of passive income, the tax rates of 5% and 0% may be applied.
There is a temporary military tax (until the completion of the military reform) applied to the monthly income at the rate of 1.5%.
Most active incomes fall under the scope of SSC with employer’s contribution of 22%, there is no employee’s contribution. Maximum chargeable amount per month is 15 months’ minimum wages – UAH 62,595 (approximately EUR 1,974 as of 1 January 2019).
The examples below show the cost of the employer and the employee in case of minimum wage level and the average wage in the private sector.
|Wage-related taxes in Ukraine||Minimum wage||Average wage in private sector|
|Exchange rate UAH/EUR 31,71||in EUR||in UAH||in EUR||in UAH|
|(as of 1 January 2019)||132||4 173||410||13 000|
|TOTAL WAGE COST||161||122,0%||500||122,0%|
|Social contribution tax||29||22,0%||90||22,0%|
|Personal income tax||24||18,0%||74||18,0%|