Today, November 28, 2024, the President signed bill No. 11416-d, which concerns changes to the Tax Code of Ukraine and is aimed at ensuring the balance of budget revenues during martial law. It introduces a number of innovations that apply to both legal entities and private entrepreneurs. In this article, we will consider the main changes provided by this draft law.
1. Fuel retail: new advance payments
One of the most important changes is the introduction of monthly income tax advance payments for taxpayers who carry out retail fuel trade. According to the innovations, such payers must pay an advance payment by the 20th of each month for each fuel retail location. The amounts of advance payments are as follows:
- UAH 60,000 for each fuel retail outlet (ordinary fuel business).
- UAH 30,000 — for places where only liquefied gas is sold.
- UAH 45,000 — for places where several types of fuel are sold, while the share of sales of liquefied gas is 50% or more of the total volume.
Also, entrepreneurs (PEs) who carry out retail trade in fuel must pay similar advance contributions from personal income tax (PIT). This is a new obligation for this category of payers.
In addition, PEs are required to keep separate records of income and expenses from the sale of fuel, alcoholic beverages and tobacco products, if they trade in these goods.
2. Changes to the basic income tax rate
The basic income tax rate for financial institutions (except insurance companies) is increased to 25%. New tax rules are also introduced for controlled foreign companies and for the payment of dividends.
Special changes concern banks. According to the results of 2024, the income tax rate for banks will increase to 50%. This innovation is aimed at increasing budget revenues during martial law.
3. Military collection
Payers of the military levy are various categories of persons who receive taxable income. They include:
- Resident natural persons who receive income both from sources in Ukraine and abroad. This includes:
• Salary,
• Income from business activities,
• Income from the sale of property,
• Other incomes subject to personal income tax (personal income tax).
- Resident natural persons who own or use agricultural plots of land. If you own or rent a plot of land for agricultural activities, you must also pay a military levy, especially if the minimum tax liability (MTR) is imposed.
- Non-resident natural persons who receive income from a source in Ukraine. This applies to foreigners who earn in Ukraine through business or employment.
- Tax agents are employers or other organizations that pay wages or income to individuals. They are obliged to withhold the military levy from the salaries of their employees and transfer it to the budget.
- Self-employed natural persons (entrepreneurs) who work are payers of a single tax. This applies to PEs:
• the first group;
• second group;
• of the fourth group.
- Private entrepreneurs who work on a simplified taxation system. This applies to PEs of the third group of legal entities).
On what incomes is the military levy distributed?
The military levy is applied to all incomes subject to personal income tax. Here are the main types of income to which the tax applies:
- Salary – if an individual works for hire or receives a salary, the military levy is withheld from him.
- Incomes from business activities are incomes received by sole proprietorships. The military tax rate is applied to the net income that remains after other taxes are paid.
- Income from the sale of property:
• sale of real estate (apartments, houses, land plots),
• sale of movable property (cars, machinery, etc.).
If a person sells real estate or a vehicle, military levy is applied to the income.
- Foreign income – if a person receives income from abroad, this income is also subject to military duty, even if the individual is a resident of Ukraine.
- Investment income is income from investment activities, in particular:
• profits from the sale of securities,
• dividends,
• royalties,
• interest on deposits and other investment earnings.
- Rental income - if a person rents out an apartment, house, vehicle or other property, the military levy is deducted from the rent.
Military levy rates
Currently, the base rate of the military levy is 1.5%. This rate remains valid for individuals who receive income subject to personal income tax.
- The increased rate – after the draft law enters into force, for certain categories of taxpayers, in particular:
• PE on the simplified system (first, second and fourth groups) the rate will increase to 5%.
• Single tax payers (PE of the third group and legal entities) will pay a military tax at a rate of up to 10%, depending on the type of activity and source of income, in accordance with the new legislation.
* For PEs, passive income in the form of interest, dividends, royalties, insurance payments and compensation, income in the form of budget grants, as well as income received from the sale of movable and immovable property owned by an individual and used in his business are not included activity
Payment of military duty
Payment of the military levy will be made according to the following rules:
- PEs of the first, second and fourth groups:
• Military service is paid in monthly advance payments.
• The payment term is until the 20th of the current month.
• They can pay the fee in advance for a quarter or a year, but no later than the end of the current accounting year.
- PEs of the third group and legal entities:
• The military tax is paid within 10 days after the deadline for submitting the tax declaration for the quarter.
- Tax agents (employers) withhold the military levy from the salaries of employees and transfer it to the budget.
Basic provisions on the date of entry into force
Draft Law No. 11416-d stipulates that the military levy enters into force on the day following its official publication. This means that most of the levy provisions will come into effect immediately upon publication, although certain regulations may have transitional provisions and special deadlines, including:
1. Individuals (citizens): for them, the military levy enters into force immediately after the publication of the law.
2. Private entrepreneurs of the first, second and fourth groups: they are obliged to pay the military tax starting from October 1, 2024 and until the end or cancellation of martial law. This means that starting from this date, the FOPs must take into account the military levy in their reporting documents and payments.
3. Legal entities (LLCs) and other taxpayers of the third group of single tax: for this category of taxpayers, the military levy has also been introduced since October 1, 2024.
Liability for non-payment of military duty
Penalties are provided for non-payment or late payment of military duty:
- For PEs of the first and second groups - a fine of 50% of the single tax rate.
- For PEs of the third group:
• If the delay is less than 30 days - a fine of 5% of the amount of unpaid military duty.
• If the delay exceeds 30 days - a fine of 10% of the amount of the unpaid fee.
- Stricter sanctions are imposed for willful non-payment of military duty:
• For the first violation – a fine of 25% of the amount of the unpaid fee.
For a repeated violation (delay over 90 days) – a fine of 50% of the debt amount.
4. Tax payment control and chamber inspections
Tax authorities receive new responsibilities for monitoring the timeliness and completeness of advance income tax and personal income tax payments. This applies to both currency exchange companies and fuel traders.
During the in-house inspection, tax officials will check not only the reporting of enterprises, but also information from the Unified register of licensees and places of fuel circulation, as well as registers related to the production of alcoholic beverages, tobacco products and liquids for electronic cigarettes. The main purpose is to check the timeliness and completeness of tax payment.
5. Monthly reporting for individuals
From January 1, 2025, entrepreneurs and tax agents who are payers of the single social contribution (USS) are required to submit monthly reports on the income of individuals, the amount of tax and SUS withheld. This innovation will allow speeding up checks and control over the income of individuals, in contrast to the previously effective quarterly reporting.
6. Minimum tax liability (MTR)
The draft law also clarifies the provisions regarding the minimum tax liability (MTR). Owners and users of land plots that belong to agricultural lands will not determine the MPZ for plots located within settlements on January 1 of the reporting year.
In addition, when determining the MPZ for 2025 and subsequent years, the "K" coefficient increases from 0.05 to 0.057. The minimum amount of MPZ for the land plot will be:
- UAH 700 per hectare.
- UAH 1,400 for land plots where the share of arable land is at least 50%.
7. New advance payments for currency exchange offices
Draft Law No. 11416-d introduces new income tax advance payments for currency exchange offices, which significantly increases the tax burden on this sector. From now on, exchange offices are required to pay fixed advance payments, depending on their location:
• 700 euros per quarter for each exchange point in Kyiv, which is approximately UAH 31,150.
• 600 euros per quarter in cities with a population of more than 50,000 people, which is approximately UAH 26,700.
• 200 euros per quarter in settlements with a population of up to 50,000 people or outside cities, which is approximately UAH 8,900.
These new obligations mean that exchange offices in Kyiv will annually pay 124,600 UAH, in large cities - 106,800 UAH, and in small cities - 35,600 UAH.
In addition, the basic (main) rate of income tax for financial institutions (except insurance) is increasing from 18% to 25% (clause 136.1-1 of the PKU). According to the results of the tax (reporting) year 2024, the basic corporate income tax rate for the purposes of taxation of banks' profits will be 50%.
These amounts are set on a quarterly basis and must be paid in advance at the beginning of each tax quarter.
8. Taxation of aid to war victims
Income in the form of funds or goods provided free of charge, which were provided at the expense of the budgets of foreign states or their funds to victims of the armed aggression of the Russian Federation, will not be included in the total taxable income. These changes apply to the 2022 and 2023 tax periods and will also apply until the end of the year in which martial law is lifted.
9. Rent for mining
Production of mining enterprises, which is transferred free of charge to the benefit of:
1. Armed Forces of Ukraine and voluntary formations of territorial communities,
2. National Guard of Ukraine,
3. Security Service of Ukraine,
4. The Foreign Intelligence Service of Ukraine,
5. The State Border Service of Ukraine,
6. Ministry of Internal Affairs of Ukraine,
7. Department of State Security of Ukraine,
8. State Service for Special Communications and Information Protection of Ukraine,
9. other military formations, their units, military units, units, institutions or organizations formed in accordance with the laws of Ukraine, maintained at the expense of the state budget, for the needs of ensuring the defense of the state.
For the extraction of minerals classified under UCT ZED codes 2517, 2505 and 2507 00, the sale price is set at the greater of two values: the actual sale price or according to the methodology approved by the government, but not less:
·6.50 USD per ton for UKT code ZED 2517 (granite).
·$5.00 per ton for UCT code ZED 2505 (sand).
·300 USD per ton for UCT code ZED 2507 00 (coalin).
10. Regarding the effective date
This draft law shall enter into force on the day following its official publication, except for certain norms, which shall enter into force on January 1, 2025. This refers to changes to Articles 51, 70, 170, 172-174 and 176 of the Tax Code regarding new reporting periods for personal income tax.
Therefore, the updated Tax Code of Ukraine is aimed at balancing budget revenues during the period of martial law, strengthening control over tax liabilities and maintaining state financial resources. Its impact on businesses, especially in the fuel, foreign exchange and financial institutions will be significant.
1. Fuel retail: new advance payments
One of the most important changes is the introduction of monthly income tax advance payments for taxpayers who carry out retail fuel trade. According to the innovations, such payers must pay an advance payment by the 20th of each month for each fuel retail location. The amounts of advance payments are as follows:
- UAH 60,000 for each fuel retail outlet (ordinary fuel business).
- UAH 30,000 — for places where only liquefied gas is sold.
- UAH 45,000 — for places where several types of fuel are sold, while the share of sales of liquefied gas is 50% or more of the total volume.
Also, entrepreneurs (PEs) who carry out retail trade in fuel must pay similar advance contributions from personal income tax (PIT). This is a new obligation for this category of payers.
In addition, PEs are required to keep separate records of income and expenses from the sale of fuel, alcoholic beverages and tobacco products, if they trade in these goods.
2. Changes to the basic income tax rate
The basic income tax rate for financial institutions (except insurance companies) is increased to 25%. New tax rules are also introduced for controlled foreign companies and for the payment of dividends.
Special changes concern banks. According to the results of 2024, the income tax rate for banks will increase to 50%. This innovation is aimed at increasing budget revenues during martial law.
3. Military collection
Payers of the military levy are various categories of persons who receive taxable income. They include:
- Resident natural persons who receive income both from sources in Ukraine and abroad. This includes:
• Salary,
• Income from business activities,
• Income from the sale of property,
• Other incomes subject to personal income tax (personal income tax).
- Resident natural persons who own or use agricultural plots of land. If you own or rent a plot of land for agricultural activities, you must also pay a military levy, especially if the minimum tax liability (MTR) is imposed.
- Non-resident natural persons who receive income from a source in Ukraine. This applies to foreigners who earn in Ukraine through business or employment.
- Tax agents are employers or other organizations that pay wages or income to individuals. They are obliged to withhold the military levy from the salaries of their employees and transfer it to the budget.
- Self-employed natural persons (entrepreneurs) who work are payers of a single tax. This applies to PEs:
• the first group;
• second group;
• of the fourth group.
- Private entrepreneurs who work on a simplified taxation system. This applies to PEs of the third group of legal entities).
On what incomes is the military levy distributed?
The military levy is applied to all incomes subject to personal income tax. Here are the main types of income to which the tax applies:
- Salary – if an individual works for hire or receives a salary, the military levy is withheld from him.
- Incomes from business activities are incomes received by sole proprietorships. The military tax rate is applied to the net income that remains after other taxes are paid.
- Income from the sale of property:
• sale of real estate (apartments, houses, land plots),
• sale of movable property (cars, machinery, etc.).
If a person sells real estate or a vehicle, military levy is applied to the income.
- Foreign income – if a person receives income from abroad, this income is also subject to military duty, even if the individual is a resident of Ukraine.
- Investment income is income from investment activities, in particular:
• profits from the sale of securities,
• dividends,
• royalties,
• interest on deposits and other investment earnings.
- Rental income - if a person rents out an apartment, house, vehicle or other property, the military levy is deducted from the rent.
Military levy rates
Currently, the base rate of the military levy is 1.5%. This rate remains valid for individuals who receive income subject to personal income tax.
- The increased rate – after the draft law enters into force, for certain categories of taxpayers, in particular:
• PE on the simplified system (first, second and fourth groups) the rate will increase to 5%.
• Single tax payers (PE of the third group and legal entities) will pay a military tax at a rate of up to 10%, depending on the type of activity and source of income, in accordance with the new legislation.
* For PEs, passive income in the form of interest, dividends, royalties, insurance payments and compensation, income in the form of budget grants, as well as income received from the sale of movable and immovable property owned by an individual and used in his business are not included activity
Payment of military duty
Payment of the military levy will be made according to the following rules:
- PEs of the first, second and fourth groups:
• Military service is paid in monthly advance payments.
• The payment term is until the 20th of the current month.
• They can pay the fee in advance for a quarter or a year, but no later than the end of the current accounting year.
- PEs of the third group and legal entities:
• The military tax is paid within 10 days after the deadline for submitting the tax declaration for the quarter.
- Tax agents (employers) withhold the military levy from the salaries of employees and transfer it to the budget.
Basic provisions on the date of entry into force
Draft Law No. 11416-d stipulates that the military levy enters into force on the day following its official publication. This means that most of the levy provisions will come into effect immediately upon publication, although certain regulations may have transitional provisions and special deadlines, including:
1. Individuals (citizens): for them, the military levy enters into force immediately after the publication of the law.
2. Private entrepreneurs of the first, second and fourth groups: they are obliged to pay the military tax starting from October 1, 2024 and until the end or cancellation of martial law. This means that starting from this date, the FOPs must take into account the military levy in their reporting documents and payments.
3. Legal entities (LLCs) and other taxpayers of the third group of single tax: for this category of taxpayers, the military levy has also been introduced since October 1, 2024.
Liability for non-payment of military duty
Penalties are provided for non-payment or late payment of military duty:
- For PEs of the first and second groups - a fine of 50% of the single tax rate.
- For PEs of the third group:
• If the delay is less than 30 days - a fine of 5% of the amount of unpaid military duty.
• If the delay exceeds 30 days - a fine of 10% of the amount of the unpaid fee.
- Stricter sanctions are imposed for willful non-payment of military duty:
• For the first violation – a fine of 25% of the amount of the unpaid fee.
For a repeated violation (delay over 90 days) – a fine of 50% of the debt amount.
4. Tax payment control and chamber inspections
Tax authorities receive new responsibilities for monitoring the timeliness and completeness of advance income tax and personal income tax payments. This applies to both currency exchange companies and fuel traders.
During the in-house inspection, tax officials will check not only the reporting of enterprises, but also information from the Unified register of licensees and places of fuel circulation, as well as registers related to the production of alcoholic beverages, tobacco products and liquids for electronic cigarettes. The main purpose is to check the timeliness and completeness of tax payment.
5. Monthly reporting for individuals
From January 1, 2025, entrepreneurs and tax agents who are payers of the single social contribution (USS) are required to submit monthly reports on the income of individuals, the amount of tax and SUS withheld. This innovation will allow speeding up checks and control over the income of individuals, in contrast to the previously effective quarterly reporting.
6. Minimum tax liability (MTR)
The draft law also clarifies the provisions regarding the minimum tax liability (MTR). Owners and users of land plots that belong to agricultural lands will not determine the MPZ for plots located within settlements on January 1 of the reporting year.
In addition, when determining the MPZ for 2025 and subsequent years, the "K" coefficient increases from 0.05 to 0.057. The minimum amount of MPZ for the land plot will be:
- UAH 700 per hectare.
- UAH 1,400 for land plots where the share of arable land is at least 50%.
7. New advance payments for currency exchange offices
Draft Law No. 11416-d introduces new income tax advance payments for currency exchange offices, which significantly increases the tax burden on this sector. From now on, exchange offices are required to pay fixed advance payments, depending on their location:
• 700 euros per quarter for each exchange point in Kyiv, which is approximately UAH 31,150.
• 600 euros per quarter in cities with a population of more than 50,000 people, which is approximately UAH 26,700.
• 200 euros per quarter in settlements with a population of up to 50,000 people or outside cities, which is approximately UAH 8,900.
These new obligations mean that exchange offices in Kyiv will annually pay 124,600 UAH, in large cities - 106,800 UAH, and in small cities - 35,600 UAH.
In addition, the basic (main) rate of income tax for financial institutions (except insurance) is increasing from 18% to 25% (clause 136.1-1 of the PKU). According to the results of the tax (reporting) year 2024, the basic corporate income tax rate for the purposes of taxation of banks' profits will be 50%.
These amounts are set on a quarterly basis and must be paid in advance at the beginning of each tax quarter.
8. Taxation of aid to war victims
Income in the form of funds or goods provided free of charge, which were provided at the expense of the budgets of foreign states or their funds to victims of the armed aggression of the Russian Federation, will not be included in the total taxable income. These changes apply to the 2022 and 2023 tax periods and will also apply until the end of the year in which martial law is lifted.
9. Rent for mining
Production of mining enterprises, which is transferred free of charge to the benefit of:
1. Armed Forces of Ukraine and voluntary formations of territorial communities,
2. National Guard of Ukraine,
3. Security Service of Ukraine,
4. The Foreign Intelligence Service of Ukraine,
5. The State Border Service of Ukraine,
6. Ministry of Internal Affairs of Ukraine,
7. Department of State Security of Ukraine,
8. State Service for Special Communications and Information Protection of Ukraine,
9. other military formations, their units, military units, units, institutions or organizations formed in accordance with the laws of Ukraine, maintained at the expense of the state budget, for the needs of ensuring the defense of the state.
For the extraction of minerals classified under UCT ZED codes 2517, 2505 and 2507 00, the sale price is set at the greater of two values: the actual sale price or according to the methodology approved by the government, but not less:
·6.50 USD per ton for UKT code ZED 2517 (granite).
·$5.00 per ton for UCT code ZED 2505 (sand).
·300 USD per ton for UCT code ZED 2507 00 (coalin).
10. Regarding the effective date
This draft law shall enter into force on the day following its official publication, except for certain norms, which shall enter into force on January 1, 2025. This refers to changes to Articles 51, 70, 170, 172-174 and 176 of the Tax Code regarding new reporting periods for personal income tax.
Therefore, the updated Tax Code of Ukraine is aimed at balancing budget revenues during the period of martial law, strengthening control over tax liabilities and maintaining state financial resources. Its impact on businesses, especially in the fuel, foreign exchange and financial institutions will be significant.
