When planning to run a business in Ukraine, investors need to know the tax burden not only on the company’s profits, but also on employees’ salaries. Taxes in Ukraine are regulated by the Tax Code of Ukraine, double taxation agreements, special laws, etc.
Regardless of the type of activity, all Ukrainian companies pay:
- Income tax or Single tax.
- VAT (only those who are VAT payers).
- Taxes and fees on salaries: income tax, military tax, single social contribution.
Depending on the taxes paid (income tax vs. single tax, income tax and VAT vs single tax), there are “general taxation system” and “simplified taxation system”.
LLCs pay the following taxes:
- General taxation system:
- Income tax – 18%.
- VAT – 20%
- Simplified taxation system (* conditions see below):
- VAT payer:
- The single income tax is 3%.
- VAT – 20%
- VAT non-payer:
- The single income tax is 5%.
- VAT – no.
- VAT payer:
In addition, investors should keep in mind that, regardless of the tax system used, employees’ salaries will be taxed as follows:
- Personal income tax: 18% (payable)
- Military tax – 1.5% (charged from salary)
- Unique social contribution – 22% (charged from the payroll)
Thus, the payment of a salary of UAH 1,000. will mean for LLC:
- Transfer of a “net” salary to an employee – UAH 805. (1000 – 18% – 1.5%)
- Transfer of taxes withheld from salary – 195 UAH. (18% + 1.5% of 1000)
- Transfer of the single social contribution deducted from the wage fund (company funds) – UAH 220 (1000 * 22%)
** read below about the use of FOP with a tax burden of 5% + SSC.
* Only those LLCs may sue a simplified system of taxation, which:
- Do not include in their founders companies that are not payers of the unique (single tax), which own a 25% or more share in the authorized capital of LLC (see paragraphs 291.5.5. Paragraph 291.5 of Article 291 of the Tax Code of Ukraine)
- Whose annual income does not exceed 1167 minimum wages set as of January 1 of the tax (reporting) year (in 2021 6000 * 1167 = 700200 UAH.)
- Do not engage in certain activities (gambling, currency exchange, production and sale of excisable goods, etc. – see paragraph 291.5 of Article 291 of the Tax Code of Ukraine)
- Do not have a tax debt (see Item 291.5.8 item 291.5 of Article 291 of the Tax Code of Ukraine)
- (For details, see Article 291 of the Tax Code of Ukraine)
** If the LLC transfers funds as payment for services / works / goods to Sole proprietor, the following amounts are taken into account and taxed personally by the sole proprietor:
- On the simplified system (3 groups) – 5% (single tax, excluding VAT) or 3% (single tax) + 20% (VAT, taking into account the system of tax credit formation). Additionally, the SSC is paid monthly (possibly: the minimum rate).
- In the general system – 18% (income tax) + 1.5% (military tax) + 20% (VAT, including the system of tax credit).
In practice, 3 groups, non-payers of VAT, are most often used, so they pay a single tax of 5% of the amount of income and a single social contribution (minimum monthly rate 22% of the minimum wage, for example, with a minimum wage of UAH 6,000, the minimum SSC rate is UAH 1,320).
Depending on the type of activity, sales, founders and other conditions, different types of taxes and different rates may apply. Therefore, in the framework of this legal advice, excise duties, customs duties, land taxes were not considered.
Regarding taxation, legal assistance in developing business plans, appealing the results of tax audits, you can contact the specialists of the law firm “Zilver” by phone: +38 050 140 95 60, +38 098 002 78 25, Email: email@example.com
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