Whether you are a foreigner employed by an Ukrainian company or an entrepreneur looking to start a business abroad, at some point you will have to dig deeper into the tax system in Ukraine and the sooner you do that, the better. Understanding how taxes in Ukraine work gives you an upper hand when you are planning your business ventures. In this article we will focus on the most basic tax laws, which pertain to individuals working and residing on the territory of Ukraine, and organizations conducting businesses in Ukraine or gaining profits from their sources on the territory of Ukraine.
According to the Ukrainian law, taxpayers are the residents, who conduct their businesses on the Ukrainian territory or abroad and the foreigners, who conduct their businesses in Ukraine. If your place of permanent residence is located in Ukraine, but you are also a citizen of another country, you are obliged to pay the taxes in Ukraine if the center of your businesses is located on the territory of Ukraine or if you reside in Ukraine for 183 days in a year or more. The standard tax rate in Ukraine is 15%. It is applied to the employment income, as long as it is less than 10 times the Ukrainian minimum monthly income. The same rate is applied to investment income, rental income, income resulting from a sale of movable property or from inheriting from a testator, who is not a resident of Ukraine. The 17% rate is applied to employment income, which exceeds the level of 10 times the minimum monthly income. The same rate is applied to the income resulting from a sale of immovable property by a non-resident or from inheriting, when the heir is not a resident of Ukraine.
Corporate taxes apply to domestic and foreign entities, who carry out businesses in Ukraine or receive profits from sources located on the territory of Ukraine. The corporate tax rate is 18%, however the rate is often reduced for specific types of businesses. If your company operates in the software industry, the tax rate is reduced to only 5%. Companies with a small turnover can also choose the simplified taxation with the flat rate of 5%. Reduced tax rates apply also to insurance companies, however the amount of the deduction depends on a few factors and is established individually.
Ukrainian tax law supports the growth of modern companies, especially the ones operating in the software development field and small businesses. However, there are multiple other ways to apply for reduction of taxes, some of which are widely known and used in other countries, other are specific to Ukraine and its tax law system. It is impossible to describe all these rules briefly, plus the ability to interpret the law and good knowledge of how it is applied might be required in order to establish the best tax rate for your company. To find the best solution and significantly reduce the tax rate consult a professional with a good background in Ukrainian tax system.
Written by Marta Gromadzka, a blogger, a copywriter, a marketing specialist.