The Tax Code determines taxable profits as net profits before tax (NPBT) as per accounting records, either Ukrainian statutory or International Financial Reporting Standards (IFRS), and adjusted for ‘tax differences’.
Taxpayers with prior year annual income equal to or less than UAH 40 million (net of indirect taxes) may opt out of making the adjustments. Note that they do remain eligible for loss carryforward allowances (see the Deductions section).
A taxpayer is entitled to adopt any of the methods of inventory valuation prescribed by financial accounting rules, namely: the first in first out (FIFO) method, weighted average methods, identified cost of unit of goods, normative cost, or sale price. The last in first out (LIFO) method does not apply in Ukraine.
Capital gains on the sale of property
Income from the sale of property (including buildings and land plots) should be recognised according to financial accounting rules.
Income from securities
Profit from trading in securities is taxable at the standard CIT rate. Incurred losses are non-deductible, but may be carried forward to offset future profits from trading in securities without any limitations.
Dividends received by a Ukrainian entity from another Ukrainian entity that is a CIT payer are exempt from CIT.
Dividends received by a Ukrainian entity from a non-resident are exempt from CIT only if:
- Ukrainian entity owns at least 10% share in equity of such non-resident during the calendar year;
- Such non-resident is not registered in low-tax jurisdiction, or even if such non-resident is registered in a low tax jurisdiction, but Ukraine has a double tax treaty concluded with respective low tax jurisdiction.
Companies paying dividends are required to pay advance CIT on payment of dividends (ATD) at the standard CIT rate, unless the dividends are paid to individuals or out of received dividends (with some other exceptions). ATD applies only to the portion of dividends that exceeds taxable profits (ie. adjusted net profits before tax) of the respective dividend year for which CIT is already paid.
If the amount of the paid ATD exceeds the amount of the accrued CIT of the taxpayer-issuer of corporate rights, the excess amount will be applied to reduce the taxpayer’s CIT payment due in the following periods. In case the taxpayer is in a loss-making position, the said amount will be applied to reduce the CIT payment due in the following periods until it is fully utilised. Collective investment vehicles and taxpayers under the simplified tax regime are released from ATD.
Interest received by taxpayers is included in their taxable income on a general basis according to financial accounting rules.
Income from rent/royalties received by taxpayers is included in their taxable income on a general basis according to financial accounting rules.
Foreign exchange gains/losses
Realised and non-realised foreign exchange gains/losses are generally treated as taxable income/deductible expenses, similar to financial accounting rules.
Other significant items
Ukrainian tax legislation does not provide special tax treatment for bribes, kickbacks, or illegal payments.
Income received as payment for goods (works, services) shipped (provided) while the taxpayer used the simplified tax system will increase the NPBT.
Starting from 23 May 2020, CIT taxable base shall be increased by 30% of the value of goods, works or services sold to residents of low-tax jurisdictions and non-resident entities established under certain legal forms. The lists of low-tax jurisdictions and legal forms (e.g. a partnership) are approved by the Cabinet of Ministers of Ukraine and are being amended from time to time. This rule does not apply if the transaction is controlled for transfer pricing purposes. Even if the transaction is uncontrolled, this rule can be waived if a taxpayer confirms the arm’s-length nature of the transactions in accordance with the transfer pricing rules.
Foreign income is taxed under the general rules, and there are no special rules regarding anti-deferral or unremitted earnings.