[ESTABLISHING A BUSINESS ENTITY IN UKRAINE] 516
a ground for obtaining a permit for immigration to Ukraine. 4.4. Tax issues to consider when entering the Ukrainian market What are key taxes payable by a Ukrainian company? The most common taxes payable by Ukrainian companies are corporate profit tax (the standard rate is 18%), VAT (the standard rate is 20%), and employment-related taxes (to be discussed below). If the company owns or rents some property, there are also property taxes to consider, such as land tax and real estate tax. Land tax is imposed on owners and users of land. The exact rate of tax on plots of land is determined by the local municipal authorities within the maximum limits established by the Tax Code. Depending upon the type of land, the rate varies from 0.1% to 12% of the normative evaluation of a plot of land. Real estate tax is paid by owners of real estate. The tax base is the area of the real estate. The exact tax rate is established by local municipal authorities depending upon the types and location of real estate objects within the maximum limit of 1.5% of the monthly minimum wage (annually established by the state budget law) per 1 square metre. Are there any tax incentives for foreign investors available? Ukrainian tax incentives are typically focused on specific areas of business or operations which the state wants to support or promote. For example: ➢ Companies operating in the processing industry, R&D, collection, treatment, and disposal of waste, and material recovery can become members of industrial parks and therefore enjoy
exemption from corporate profit tax and other tax benefits. ➢ Companies engaged in the processing industry, waste management, transportation, extraction of minerals, education, logistics, tourism, warehousing, and some other industries and planning significant investments in Ukraine (i.e., exceeding EUR 20 million) can also apply for corporate profit tax exemption and certain other tax and customs exemptions. ➢ IT companies meeting certain qualifying requirements can enjoy the tax benefits of a special tax regime for this industry called “ Diia City”. ➢ Importation of goods to be further contributed into the charter capital of a Ukrainian subsidiary is exempt from customs duties provided that it will not be alienated for 3 subsequent years. What is the tax burden for the salary of the employees of a Ukrainian company? The employer pays the following taxes as the tax agent of its employees (tax base – gross salary accrued to the employee; the salary actually paid out to the employee is decreased by the amount of the below taxes so that they are actually paid at the employee’s expense): - personal income tax at the rate of 18%; - defence contribution at the rate of 1.5%. Also, the company as an employer at its own cost pays 22% of social contribution applicable to a gross salary and accrued on top of it. The maximum tax base applies, which results in maximum absolute social contribution amount in 2023 being EUR 550 per month.
ILN Corporate Group – Establishing a Business Entity Series
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