Ukraine

Changes related to the introduction of martial law

Several changes became effective from 1 January 2022 related to the following areas:

• Introduction of limitations related to tax loss carryforwards for large taxpayers.
• Introduction of minimal tax burden for agricultural producers on land plots.
• introduction of the controlled foreign company (CFC) concept (see Controlled foreign companies (CFCs) in the Group taxation section).
• Place of effective management of non-resident companies in Ukraine (see the Corporate residence section).
• Introduction of value-added tax (VAT) for digital business-to-consumer (B2C) services supplied by non-residents.

On 14 August 2021, the Law of Ukraine 1667-IX 'On Stimulating the Development of the Digital Economy in Ukraine' entered into force. The purpose of the Law 1667-IX is creation of a special legal regime for the IT industry in Ukraine called 'Diia City'.

On 14 December 2021, the Ukrainian Parliament adopted the Law of Ukraine 'On Amendments to the Tax Code of Ukraine to Stimulate the Digital Economy in Ukraine', which is a tax part of the 'Diia City' special legal regime and provides special tax conditions for residents of the City. The law entered into force on 1 January 2022.

Ukraine denounced its double tax treaties (DTTs) with Russia Federation in May 2022 and with Belarus in November 2022, which have since ceased to be in force.

On 19 August 2022, Ukrainian tax authorities acceded to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information. Thereby Ukraine joins the international framework for automatic exchange of tax-related information on financial accounts of taxpayers under the rules on the Common Standard on Reporting and Due Diligence for Financial Account Information (CRS). The first exchange of information is expected to be done in 2024 with respect to new accounts opened after 1 July 2023 and individuals' High Value Accounts.

Diia City: Special legal and tax regime for IT companies in Ukraine

Starting from 2021 the 'Diia City' (a special legal and tax regime for IT companies in Ukraine) started working. This regime is created for the purpose of stimulating the development of the IT sector in Ukraine. Benefits of 'Diia City' include:

• Certain guarantees for its residents (in particular, the validity of the legal regime for not less than 25 years, the stability of tax conditions, the presumption of legality of the residents of 'Diia City').
• The possibility of choosing a special tax regime.
• Protection from excessive interference in the resident’s activities by the state.
• Simplification of the registration of relations with IT specialists (possibility of hiring employees within labour relations, individuals, including foreign IT specialists, under gig contracts, and concluding agreements with private entrepreneurs).
• Engaging and encouraging talent in the field of IT by establishing additional compensation, social guarantees, the use of options, etc.

Increased corporate income tax (CIT) rate for banks and financial institutions 

The CIT rate for banks' and financial institutions’ profits is increased.

The main provisions of the Law ’On Amendments to the Tax Code of Ukraine on the Specifics of Taxation of Banks and Other Taxpayers‘ No. 3474-IX and Law “On amendments to the Tax Code of Ukraine and other laws of Ukraine to ensure balanced budget revenues during the period of martial law” No. 4015-IX, which were adopted by the Verkhovna Rada of Ukraine on 21 November 2023 and 10 October 2024, respectively, are the following:

• Temporarily, based on the results of the tax years 2023 and 2024, the CIT rate is 50% for banks, including in case of advanced CIT payments.
• Banks cannot utilise their tax losses carried forward from the past periods in 2023 and 2024. Currently, this limitation applies to 2023 and 2024 reporting periods only. Tax losses carried forward could be utilised in the tax periods starting from 1 January 2025.
• Starting from 1 January 2025, the CIT rate for financial institutions (excluding insurance companies) is increased to 25% (instead of the general 18% rate).

Advance CIT payments to be paid by fuel trade retailers

Starting from December 2024 fuel trade retailers are obliged to pay advance CIT payments for each place of retail fuel trade included in the Unified Register of Licensees and Places of Circulation. Advance CIT payments are to be made on a monthly basis not later than the 20th of the reporting month.

The following amounts of the advance CIT payment are prescribed (per each place of retail fuel trade):

• UAH 30 thousand – for locations selling only liquefied gas;
• UAH 45 thousand – for locations where the volume of liquefied gas sales exceeds 50% of the total fuel brought to a temperature of 15°C in total volume of fuel sold in the previous month;
• UAH 60 thousand – for other places of retail fuel trade.

The amount of CIT advance payments paid during the reporting (tax) period reduces the overall CIT liabilities of the taxpayer for such reporting (tax) period defined at the general CIT rate of 18%, in the amount that not exceed the amount of the accrued CIT liability for such tax (reporting) period. 

The amount of the advance CIT payments that exceeds the overall CIT liability:

• cannot be carried over to future periods;
• are non-refundable;
• cannot be credited against other taxes and fees.

In case of non-payment/late payments of the advance CIT payments, the fuel trade retailer is subject to liability in accordance with current Ukrainian tax legislation, with the application of financial penalties.