The main changes concern the increase in military tax for those who have already paid it.
On October 10, the Verkhovna Rada supported the historic tax increase. In particular, the military tax will increase from 1.5 to 5%. However, such changes will not affect everyone.
What and how much each Ukrainian and business will now pay for – see the exclusive TSN.UA.
Record tax increase
The Verkhovna Rada has adopted the draft law on increasing taxes, which has already been called historic. The second reading of the bill began on October 9 in a practically empty hall – there were about three dozen deputies there. There was no one in the government box during the consideration of the bill. More than 1,300 amendments were submitted to the bill. Most of them were not taken into account.
And already on October 10, the people's deputies voted for the bill in the second reading. The decision was supported by 247 parliamentarians, said the people's deputy from the Golos faction, deputy chairman of the Verkhovna Rada Committee on Tax Policy Yaroslav Zheleznyak. It is noteworthy that the deputies agreed not to increase the military tax for the military themselves, for the financing of which additional budget funds were needed.
How and what taxes will change
So, the main changes concern the increase in military tax for those who have already paid it, as well as its introduction for those who work on the simplified tax system. In particular, the law provides for the following.
Quote:
- increase in military tax on salaries of all individuals from 1.5% to 5%
- increase from January 1 in military tax from 1.5% to 5% on other income of citizens
“Individual entrepreneurs of the 1st, 2nd and 4th groups will pay military tax in the amount of 10% of the minimum wage established on the 1st day of the reporting month (from October 2024 this is 800 UAH per month), and individual entrepreneurs of the 3rd group will pay 1% of their income in the form of military tax”, — the message says.
The standard clause means that individual entrepreneurs of the third group, who pay a single tax of 5% of their income, will additionally pay another 1% military tax. For example, now, for every 1 thousand hryvnia of monthly income, individual entrepreneurs of the third group pay 50 hryvnia of a single tax. And from October, they will pay 60 hryvnia. The law also provides for changes in the taxation of banks and financial institutions.
Banks must pay 50% of the profit tax in 2024. And financial institutions (except for insurers) – 25% of the profit, starting from January 1, 2025. The law also contains separate “sectoral” changes. For example, it determines how gas stations must make advance payments of profit tax – in the amount of 30, 45 or 60 thousand UAH depending on the type of gas station for each place of sale of fuel. T
it also links the rates of advance tax contributions for currency exchange offices to the euro exchange rate. Such a contribution will be 700 euros for each currency exchange office in Kyiv, 600 euros in cities with a population of more than 50 thousand residents and 200 euros for other settlements. A minimum land tax (MLT) is also established in the amount of 700 UAH and 1400 UAH per hectare, and rent for the extraction of rocks for crushed stone, granite and sand is not less than 5 dollars per ton.
It is noteworthy that the law provides for a transition from quarterly to monthly reporting of enterprises and companies on payments to individuals. This is perceived as a sign that the government is preparing to introduce economic reservations based on the level of salaries.
However, according to MP Yaroslav Zheleznyak, the adopted law will probably have to be re-voted.
“I wouldn't say now that the tax law has been adopted… As I wrote, during the review, amendment #988 was shot down. To understand, this amendment is half the law – it is physically set out on 10 A4 pages. Therefore, it seems to me that the law will have to be re-voted to simply bring it into some kind of order. In short, I think there are now many legal problems with the text,” the message states.
The MP described what he is not satisfied with in the document.
Quote: 1 ) The VZ for everyone except for individual entrepreneurs on the simplified tax system is raised from the day the law comes into force, and not from October 1. True, how to count it from the middle of the month remains an open question….
2) VZ for individual entrepreneurs-simplified tax system is still from October 1;
3) There are no transfers of VZ to January 1 for anyone;
4) e-residents are also subject to military tax. And this, damn, was my amendment, which for some reason was not taken into account separately;
5) legal pegs (there are several dozen of them), which were killed so that the structure would hold well, all fell out;
6) exceptions for sole proprietors who are in the occupied territories and the territory of the combat zone, fell out;
7) the new VZ for sole proprietors in the MNS will not be included;
Business statement
Business also had its say on increasing taxes. Monobank co-founder Oleg Gorokhovsky said that “when business loses, no one wins.” Also, according to employers, the proposed increase will lead to an increase in the tax burden on legal business entities, which in turn will lead to greater shadowing of wages in the private sector.
But, as we see, this did not affect the government. Accordingly, the increase in the military tax from 1.5% to 5%, according to Yaroslav Zheleznyak, will hit Ukrainians quite hard. The MP noted this after the document was voted on in the Rada in the first reading. At that time, the people's representative was very outraged that taxes could be paid retroactively.
This should affect employees of state institutions and public sector employees in the social sphere. And what should an employer do if he has already paid an advance?
And after the bill on increasing taxes was voted on in the second reading on October 10, Zheleznyak noted that in fact, there will be no retroactive taxation of income for most taxpayers. However, one nuance remains.
“Well, it is on paper from October 1, but since the law will obviously be signed later, there is actually no mechanism for this “retroactive”. The military tax for everyone except for individual entrepreneurs on the simplified tax system is raised from the day the law comes into force, and not from October 1. However, how to calculate it from the middle of the month remains an open question …,” the report says.
Why raise taxes
According to government calculations, these tax changes should bring an additional UAH 58 billion to the budget this year, and UAH 137 billion next year. The money is needed to cover the shortfall in funding for the army, the government says.
However, they also say that at least UAH 500 billion is missing for military spending this year alone. In particular, as Prime Minister Denys Shmyhal stated, additional funds are needed for additional mobilization.
“We know that funding each military for the budget costs 1.2 million hryvnia. Accordingly, when we select people, we must increase the budget of the Armed Forces of Ukraine. The figure of 500 billion, which was announced and submitted, is the deficit that the Armed Forces of Ukraine needs until the end of this year,” the statement says.
Cheap goods from Aliexpress and Temu are under threat
Let me remind you that Ukraine also wants to tax international parcels. The authorities say that due to duty-free import of goods from Aliexpress and Temu, the Ukrainian budget annually loses billions of hryvnias, and the army really needs this money. Moreover, certain sectors of Ukrainian entrepreneurship are on the verge of survival, because they cannot withstand competition with international marketplaces. Parcels from abroad worth up to 150 euros are not subject to VAT (20%) and duties (about 10%).
For parcels whose value exceeds this limit, taxes are calculated on the excess amount: for a parcel worth 200 euros, taxes must be paid on 50 euros. That is why this benefit was in the sights of the Ministry of Finance back in July 2024, when it published the first plans to increase taxes to cover defense needs.
During their discussions, the abolition of the benefits for international parcels was abandoned, but the government and MPs did not forget about it.
The benefits were not abolished
The department proposed to cancel the benefit and make an exception for non-commercial parcels, such as gifts from relatives sent from abroad. For them, VAT was proposed to be charged starting from a price of 45 euros.
According to the Finance Ministry's calculations, this initiative should provide the budget with UAH 3 billion in September-December, and the entire tax increase plan – UAH 125 billion. But this is only on paper; in reality, the picture was not so optimistic, so they decided to abandon this initiative. For now.
Ukrainian entrepreneurship vs. marketplaces
It is not surprising that the abolition of the tax exemption for international parcels is almost the only provision of the tax bill that is openly supported by the largest business associations. In particular, this was noted in the statement of the Ukrainian Business Council, which unites 117 business associations of the country.
The most negativity is directed at the Temu marketplace, which invests millions of dollars in aggressive marketing in the US, EU and Ukraine, according to the Aurora chain of stores. Ukrainian entrepreneurs complain that companies work in unequal conditions.
The media writes that the volume of parcels from Temu is growing at a frantic pace: in the spring, Ukrainians allegedly ordered 300 thousand goods there per month, and in the fall this figure could reach 1 million. The growing popularity of the Chinese marketplace is indirectly evidenced by the fact that it occupies the first steps of shopping applications.
Customs Collapse
In 2023, almost 52 million parcels worth more than UAH 62 billion were imported to Ukraine. At the same time, the cost of 51.5 million parcels with a total value of UAH 40 billion did not exceed the tax-free limit of EUR 150. That is, taxes are paid on less than 1% of international parcels imported to Ukraine. T
However, the abolition of the tax-free import benefit for parcels worth up to EUR 150 could immediately and significantly increase the burden on customs authorities and complicate the lives of millions of Ukrainians who buy goods abroad. Moreover, such a flow of parcels will simply stop the work of customs, worries the chairman of the parliamentary committee on finance, tax and customs policy Yaroslav Zheleznyak.
When will the bill be presented?
Although the issue of canceling the benefit for international parcels is not on the agenda now, the deputies are already working on the relevant changes, assures Getmantsev.
We will add that for military personnel the military tax was left at 1.5% — the Rada adopted the corresponding amendment to the law. For other Ukrainians, it will be 5%.
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