Starting from 2017, 'tax holidays' until 2021 were introduced for taxpayers with annual income less than UAH 3 million, provided they meet the requirements on (i) payroll amount (not less than two times the statutory minimum wage monthly per each employee), (ii) defined average number of employees in the preceding periods (for the entities established before 1 January 2017), and (iii) are compliant with limitations on types of activities (according to the specific list).
As a part of tax measures related to COVID-19, the following incentives were introduced to Ukrainian tax legislation:
- Donors of funds or medical goods and other listed goods during the quarantine period will be able to fully deduct the respective expenses for tax purposes for the year 2020.
- State and municipal health care institutions that have received funds or free of charge medical goods and other listed goods during the quarantine period shall not tax income from the receipt / tax deduct expenses from the use of such funds and goods for tax periods of 2020.
In addition, recent changes to tax legislation allowed the application of a reduced statutory minimum useful life for machines, equipment, and vehicles (two years), as well as for transmitting devices and other fixed assets (five years), provided that such fixed assets were put into operation during the period between 1 January 2020 and 31 December 2030 and are employed in business activity of the taxpayer.
Simplified (unified) tax regime
Entities and individuals (i.e. private entrepreneurs) are entitled to use a simplified (unified) tax regime (with exemption from CIT) if certain requirements are met.
Groups 1 and 2 of the simplified (unified) tax regime are available for private entrepreneurs only, and group 3 for both private entrepreneurs and legal entities (depending on the types of activities, the level of income [only up to UAH 7 million, except agricultural producers], and the number of employees’ criteria).
These regimes foresee low effective tax rates (up to 10% of the amount of statutory subsistence minimum for able-bodied individuals as of 1 January of the reporting year for group 1 per month; up to 20% of the minimal salary set as of 1 January of the reporting year for group 2 per month, or up to 5% of revenue for a private entrepreneur/an entity of the third group) and easier reporting for small businesses. However, specific types of business activities are prohibited under this tax regime (inter alia, transactions with certain excisable products, exploration/production/sale of precious metals and stones, company management and communication services).
Taxpayers of group 1 are not required to use cash registers. Taxpayers of group 2, 3, and 4 are obligated to start using cash registers in the quarter following the one when their revenue exceeds UAH 1 million. Taxpayers engaged in selling technically complex household goods subject to warranty services, medicines, and healthcare products are obligated to use cash registers regardless of the revenue amount they earn.
Starting from 1 October 2020, the list of taxpayers required to use cash registers regardless of the revenue amount they earn will be extended, in particular to taxpayers engaged in: e-commerce; hoteling; selling jewellery and household goods made from precious metal and gems; retail of used goods via shops; restaurant business; providing travel agency and tour operator services; and selling of textiles, spare parts, and accessories for motor vehicles.
Starting from 1 April 2021, all taxpayers of group 2, 3 and 4, regardless of their revenue, will be obligated to use cash registers.
The group 4 classification of the simplified (unified) tax regime is available for qualified agricultural producers.
Agricultural producers are entitled to use a very favourable tax regime (with exemption from CIT), provided certain requirements are met. The main criterion requires that income from the sale of their own agricultural products constitutes not less than 75% of their total gross revenue of the previous tax (reporting) year.
Under this regime, the amount of tax due depends on the size of the agricultural land plot owned or rented by the agricultural producers. The tax rates vary from 0.19% to 6.33%, apply to the normative monetary value of one hectare of agricultural land, and depend on the type of such land.
As a part of tax measures related to COVID-19, private entrepreneurs, individuals engaged in independent professional activity, and members of a farm were exempted from mandatory payment of USC for the reporting periods of March, April, and May 2020.
Foreign tax credit
Tax residents are allowed to credit foreign taxes paid on income received abroad, provided there is a DTT between Ukraine and the relevant foreign jurisdiction. The amount of foreign tax credit is limited to the amount of Ukrainian tax payable in the respective reporting period. To claim a tax credit, the taxpayer requires an official confirmation of income received, tax base, and amount of income tax paid in such a foreign jurisdiction. Such documents are issued by the relevant foreign tax authority and should be properly legalised and translated into Ukrainian.