Published 6 August 2020. Some rules have changed since; ask us for the current position.
Ukraine has a general tax system and a simplified one. They differ in the number of taxes a business pays to the budget. The general system requires a professional accountant to keep the books. In theory, you can manage the simplified system without special skills. In practice, we advise against trying: it is very easy to end up with a fine. So professional help is needed either way, although businesses on the simplified system have far less accounting work.
Types of taxes in Ukraine
Here are the taxes paid by companies and organisations on the general tax system:
- corporate profit tax;
- personal income tax (ПДФО);
- the single social contribution (ЄСВ);
- military levy.
When it comes to types of taxation, Ukraine is considered one of the hardest countries in Europe to understand. Things change all the time, so you have to keep your finger on the pulse, especially on the general tax system. Accounting errors can call your organisation's activities into question, and fines grow every year. We say this to show the situation as it really is. This is what businesses face every quarter: new rules, changes nobody hears about until the last day, rising fines and tax inspections.
There are other taxes as well. A company that leases out property also contributes to the budget. Indirect taxes are the main source of budget revenue. Tobacco, alcohol and fuel are also subject to excise duty.
Tax rates show how much pressure the state puts on people and businesses
Ukraine's budget revenue depends heavily on consumption of imported goods and the indirect taxes that come with it (VAT, customs duties, excise). When taxes take more than 30–40% of income, the economy moves into the shadows. Low tax rates in Ukraine are an illusion, because businesses pay the lion's share of taxes and individuals pay only a smaller part directly. That is why it matters so much to choose the right tax system from the start. Tax planning should become standard practice for Ukrainian companies, yet that culture is only just emerging in the business community. We want to bring you into a practice that pays off for your business. Calculations, planning and looking for lawful ways to reduce the tax burden are all perfectly normal.
Taxes and levies can be reduced while staying within the law. For example, costs differ between the groups of single tax (єдиний податок) payers, and each group has clear pros and cons. Each group has its own limits on income, headcount and permitted activities. Get advice before you start a business.
Now is the time to think about lowering taxes and levies and streamlining your business. Whichever type of taxation in Ukraine you choose, contact the specialists at Key Solutions, a business accounting services firm, for help with your books and any tax planning questions:
- by phone;
- by email;
- via online chat.
Frequently asked questions
- Which tax system does a sole proprietor with VAT belong to?
In Ukraine, VAT is paid by sole proprietors (ФОП) on the general system who are registered for VAT, and by Group 3 sole proprietors on the simplified system. Group 3 also has an option without VAT, but with a higher single tax rate.
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