MAZARS UKRAINE LLC
04070, Illinska Street, 8, Kyiv, Business Center Illinsky Ukraine
+38 (044) 390 71 07
+38 (044) 390 71 06
(+38) 044 390 71 07
(+38) 044 390 71 07
The corporate income tax (“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 several adjustment items. 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 law allows deducting prior year losses, while the carry-back of losses is not permitted. Tax law allows deducting prior year losses, while the carry-back of losses is not permitted. If company’s annual income for the previous year is below UAH 20 million (approximately EUR 704 thousand as of 1 January 2017), such taxpayer is entitled not to make any adjustments (except for tax losses carry forward).
Sole traders and legal entities within the certain limits of income, as well as entities qualifying as agricultural producers, may apply for a simplified taxation system (paying single tax). Certain types of business (e.g., insurance) are subject to special tax rules.Ukrainian tax law stipulates a withholding tax (15%) on dividend, interest, royalty, etc., paid to a foreign company; however, in most cases a lower rate or exemption may be applied under a double tax treaty. Ukraine has a wide double tax treaty network with more than 70 countries.Real property tax and land tax are charged as local taxes in Ukraine.
|Transfer pricing in Ukraine|
|Arm’s length principle||since 2013|
|Documentation liability||since 2013|
|APA||since 2013 (applicable for large taxpayers)|
|Lack of documentation||up to 3% of the value of controlled transactions, but not more than UAH 320,000 (app. EUR 11,300)|
|Lack of report||up to 1% of the value of controlled transactions, but not more than UAH 480,000 (app. EUR 17,000)|
|Tax shortage||25% of tax shortage; 50% in case of recurrent violation during 1095 days|
|Direct or indirect or common control; or control in practice independently from the ratio|
Level of attention paid by Tax Authority:
The standard rate is 20% (7% for pharmaceuticals and medicinal products supplies; export of goods is taxed at 0% rate). 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. in respect 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 seller/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.
Special VAT regime for agricultural companies, under which such companies could partly accumulate VAT on their special accounts, was cancelled from 1 January 2017.The other indirect tax in Ukraine is excise tax. The excisable goods are spirits, beer, tobacco, petroleum, cars, trailers, motorcycles, electricity.
|VAT Options in Ukraine||Applicable / limits|
|VAT group registration|
|Import VAT deferment|
|Local reverse charge||Applicable to imported services|
|Option for taxation|
|- letting of real estate|
|- supply of used real estate|
|VAT registration threshold**||UAH 1 million (app. EUR 35,000)|
* For several types of operations (e.g., construction works; supply of heat, water, gas to individuals or governmental agencies).
** Voluntary registration is allowed without any limitations.
Personal income tax (“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 both residents and non-residents is 18%. Dividends are subject to 18% PIT, except for dividends distributed by Ukrainian CIT payers, which are subject to 5% PIT. 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 social security contribution (“SSC”) with employer’s contribution of 22%. Maximum chargeable amount per month is 25 months’ costs of living – UAH 40,000 (approximately EUR 1,400 as of 1 January 2017).
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 28,42 (as of 1 January 2017)||in EUR||in UAH||in EUR||in UAH|
|113||3 200||317||9 000|
|TOTAL WAGE COST||138||122.00%||387||122.00%|
|Social contribution tax||25||22.00%||70||22.00%|
|Personal income tax*||20||18.00%||57||18.00%|
* Tax base is gross salary less the amount of employees’ USC.