The President of Ukraine has signed a law amending the Tax Code. The goal of these changes is to ensure the financing of the Armed Forces of Ukraine, particularly for paying salaries to the country’s defenders. The government has already explained the main changes and clarified how these amendments will affect businesses and citizens.
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Taxes will not be charged “retroactively”
The law comes into effect on December 1, 2024. Taxes will not be charged “retroactively”. The Verkhovna Rada will soon adopt the necessary amendments to the tax legislation to ensure alignment with the law’s effective date.
Changes in military tax rate for individuals
One of the key changes is the increase in the military tax rate for individuals. The rate will rise from 1.5% to 5% starting from December 2024. This applies not only to salaries but also to rental income, winnings, bank deposits, and other income.
How will the changes affect individual entrepreneurs (FOPs)?
The changes for individual entrepreneurs will depend on the group they belong to:
- FOPs of the first, second, and fourth groups will pay 10% of the minimum wage set at the beginning of 2025 (8,000 UAH), which will amount to 800 UAH per month. These changes will come into effect on January 1, 2025.
- FOPs of the third group will pay a military tax of 1% of their turnover for the first quarter of 2025. For them, the law will also come into force at the beginning of the new year.
Military tax does not apply to social payments
The new law does not impose military tax on social payments, pensions, scholarships, and other income that is not subject to personal income tax (PIT). Additionally, military tax does not apply to government bonds (OVDP) purchased by individuals.
Expected revenue from tax changes
According to government plans, the increased taxes are expected to generate 8 billion UAH by the end of 2024 and 140 billion UAH in 2025. These funds will be directed to finance the Armed Forces of Ukraine and support the country’s security.
Defense spending
According to the budget, 1.16 trillion UAH will be allocated for defense in 2025, which is 10 billion UAH more than in 2024. These funds will be used to pay the salaries of military personnel and other needs of the Armed Forces of Ukraine.
Additional sources of defense funding
In addition to tax changes, the government is raising additional resources through internal borrowings (OVDP) amounting to 216 billion UAH. Another 100 billion UAH will come from exceeding budget revenues, including through the formalization of the economy. The government also plans to attract funds from the banking sector, as banks have reported the largest profits in history, primarily due to working with the National Bank and state bonds.
Tax changes for farmers and other sectors
The new tax legislation includes several amendments aimed at supporting various industries:
- For agriculture, the minimum tax payment per hectare of land will increase to 1,400 UAH. This is intended to increase transparency in the sector.
- For the oil and gas sector, an advance payment of income tax will be introduced for each individual gas station, which will promote greater competitiveness in the market.
- For the winemaking industry, the minimum price for products made by Ukrainian manufacturers will be raised to support local producers’ competitiveness.
- The rent for sand and gravel will also be increased, ensuring fair taxation for extractive companies.
Monthly reporting for PIT and SSC
Starting from the new year, the reporting system for entrepreneurs will change. Tax reports for personal income tax (PIT) and single social contribution (SSC) will be submitted monthly instead of quarterly. This will ensure greater transparency and efficiency in taxation and employee registration.
Defense funding from international partners
The government also plans to attract funding for defense from frozen Russian assets. This financial resource, which belongs to the enemy, will be used to secure Ukraine’s victory.
Tax changes in the 2025 state budget
The 2025 state budget already incorporates all changes to tax legislation, including higher tax rates and new levies.
