DOING BUSINESS IN UKRAINE
Edition 1
Edition 2
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Tax system
Corporate profits tax |
flat 25% on profits |
Personal income tax |
flat 13% on gross income. No deductibility |
Payroll taxes (employer's part) |
36.7% of gross remuneration. Capped at $360 per employee per month |
Value added tax |
20% |
At present Ukraine's tax system numbers 22 types of public taxes. General taxes and compulsory payments include: profits tax; Value added tax (VAT); personal income tax; pension Fund tax; excise tax; land tax.
There are 14 different local taxes that may be levied at the discretion of the local authorities. However their rates are low and they might not be taken into account when deciding whether it's worth working in Ukraine.
Two main taxes to which we would like to draw your attention to are profit tax and VAT. Also we would like to point out personal income tax, which must be paid by investor as a physical entity if he/she is tax payer in Ukraine, and not in the home country.
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Corporate Profits Tax |
Value Added Tax (VAT) |
Personal Income Tax |
Tax rate |
25% on profits
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20% on domestic supplies of goods and services and import of goods0% on export of goods, for rending processing and repair services to non-residents, international transport services
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13% on gross income (15% from 1.01.2007)
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Payers |
Resident entities and permanent representative offices of foreign companies
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Legal entities and entrepreneurs, including single tax payers, permanent representative offices of non-residents, joint ventures, supplying domestic goods (work, services), the value of which exceeded UAH 300,000 (approximately USD 59,400 or EUR 47,100) within any period of the last 12 calendar months. Legal entities and natural persons who import goods (work, services) to Ukraine. Entities performing e-trade on the territory of Ukraine
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Residents and non-residents
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Taxable subject |
Taxable profits are defined as gross revenue, gross expenses and depreciation charges. Gross profit includes any profit from sales or non-commercial profit received or accumulated within a reporting period (i.e. quarter).
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Supply of goods and services on the customs territory of Ukraine, including transfer of fixed assets under financial lease agreements. Import of goods (ancillary services) to Ukraine (including import and transfer of fixed assets under lease agreements to the statutory fund of a legal entity). Export of goods (ancillary services), including export of capital assets under financial lease agreements. Barter transactions and disposals for non consideration.
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Work or services performed in Ukraine. Disposal of property in Ukraine. Interest from deposits held in Ukraine. Rent of property located in Ukraine. Dividends and royalty paid on shares of Ukrainian companies
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Exemption |
Expenses that are not supported by relevant documents (e.g., contract, voucher, receipt, check, etc.); expenses related to the financing of governing bodies including holding companies; service fees paid to related enterprises if only there is a documentary evidence that services were actually performed; payments in respect of goodwill; insurance expenses (except for medical, pension and obligatory insurance) in the amount exceeding5% of the total amount of deductible expenses incurred in the reporting period.
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The issue, sale and exchange of securities and corporate rights;Depository, clearing and registration of activities in respect of securities; The conveyance of property by a Lessor to a lessee for operating lease and return of property after expiry of the operating lease; Commission of lease payments under financial lease agreements in the amount of up to double bank-rate of the National Bank of Ukraine; Security of financial credits and bank guarantees; Exchange of foreign currency; Insurance and reinsurance services which are rendered by licensed insurers, insurance agents and brokers; Dividend payments and royalties in cash or securities; Funds under loan, deposits, insurance or authorization agreements; Cargoes and passengers transit through territory of Ukraine.
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Income from investments in securities issued by the Ministry of Finance and prizes from state lotteries.Alimony received from residents. Shares received from capitalization of undistributed profits provided that allocation of shares between shareholders remains unchanged. Premiums paid by employer in respect of long-term life insurance or non-state pension insurance of its employees within the limit equal to 15% of employee's monthly salary but maximum 1.4 times the subsistence wage (in 2005 - UAH 570) per month. Amounts received from employers in respect of certain types of medical treatment and services. Revenue from sale of a car, motorbike, yacht or motor boat provided that the seller pays the state (stamp) tax upon sale. Interest on a deposit placed in a bank and non-banking financial institutions and also from saving certificates (exemption is available until 31 December 2009).
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Withholding tax (subject to tax treaties)
Normally, dividends paid to foreign shareholders are subjects to repatriation tax of 15% (but this tax can be exempted from under double taxation treaties). The same applies to Ukrainian-source income received by non-residents in the form of interest, royalties, engineering services, brokerage, commission or agent services and some other types of income. Other payments to non-residents are subject to 6% withholding tax. There are specific rates relatively other payments to non-residents; 0% on insurance/reinsurance payments which are made to the first-class insurance companies (otherwise 3%), 20% on payments for advertising services and 0% payments for state securities dividends.
Investments incentive
Exemption from payment of fee
Enterprises with foreign investments are exempted from import duty according to assets in kind brought into a business, contributed to the statutory funds. If according assets are sold or differently placed by the Target Company within 3 years from the moment of their contribution to the statute fund then company -recipient will have to pay applicable import duty in the full amount of aggregate value of alienated assets.
Free economic zones
Besides Ukrainian legislation provides formation of free economic zones. Legal status of foreign investments in such zones is regulated in accordance with a separate legislation about free economic zones, where investors might be provided with additional privileges and benefits. Additional information about investment conditions might be presented upon request.
Profit withdrawal from Ukraine
As a matter of principle profit withdrawal from Ukraine is not complicated provided all taxes are paid, in particular profits and repatriation taxes. However profits tax optimization is possible. There are quite few schemes application of which depends on specific situation and on specific sphere of investor's activity. We recommend consulting separately in each specific case with Ukrainian consulting company in order to count up exactly profit level of your investments.
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