On October 10, 2024, the Verkhovna Rada of Ukraine passed in the second reading the Draft Law № 11416-д "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding Ensuring the Balance of Budget Revenues During the Period of Martial Law"

On October 10, 2024, the Verkhovna Rada of Ukraine passed in the second reading the Draft Law № 11416-д "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding Ensuring the Balance of Budget Revenues During the Period of Martial Law" (hereinafter - the "Draft Law"), which aims to increase tax rates in order to boost state budget revenues. This Draft Law  may significantly impact the business environment in Ukraine.

We would like to draw your attention to the fact that the new provisions come into force the day after the enacted Draft Law is published, and partially on January 1, 2025.

Below, we provide comments on the main provisions of the Draft Law based on the available version for the second reading.The final version may differ upon official publication. We would be pleased to discuss the relevant changes more extensively in the context of your business.

Key Provisions of the Draft Law:

1. Temporary increase of the military tax rate (until December 31 of the year in which martial law is terminated), namely the introduction of a military tax (MT) of 5% for a wide range of taxpayers and the introduction of new rules for unified tax payers:
   • Private entrepreneurs (unified tax payers of the 1st, 2nd, and 4th groups) will pay MT as an advance monthly payment in the amount of 10% of the minimum wage.
   • Unified tax payers of the 3rd group (except e-residents) will pay MT in the amount of 1% of income quarterly.
     
     Starting from January 1 of the year following the year in which martial law is terminated, the MT rate will return to 1.5%. However, the MT will continue to apply to an expanded range of taxpayers.
2. Raise of the corporate income tax (CIT) rate for non-banking financial institutions (excluding insurers) to 25%.
3. Temporary increase of the CIT rate for banks to 50% for the year 2024.
4. Introduction of monthly advance payments for corporate income taxpayers and personal income taxpayers engaged in retail fuel trade. The advance payment amount will range from UAH 30,000 to 60,000 per month for each retail fuel trade location and will depend on the share of liquefied gas sales in the total volume of sold fuel. Non-payment of the advance payment is grounds for the termination of the license for retail fuel trade.
5. Changes in tax administration. Monthly reporting (now - quarterly) on personal income tax , MT, and unified social contribution , including tax calculations by notaries and all entities participating in exchange transactions. The respective tax administration system is designed to obtain more current information on individual income levels and its taxation.
6. Changes in the calculation mechanism for the value of extracted minerals for the purposes of rent (extraction tax) payments, as well as specific rent payment rates for certain minerals, particularly gas.
7. Mandatory use of cash registers for gambling business.

We will continue to monitor developments and keep you informed.