Ukraine is one of the fastest-growing business centers in Europe. According to statistics, the country has registered a record high economic growth rate in the past few years. Behind this success are business-friendly corporate tax laws that govern the country. This article seeks to highlight some of the regulations on corporate income tax and the corporate tax administration of Ukraine.
Taxes on corporate income
In Ukraine residents, non-residents (with a PE), and foreign entities are all liable to Corporate Income tax (CIT). Nevertheless, while resident entities get charged on their worldwide revenues, non-resident entities are only required to pay tax on the incomes sourced in the state. The standard corporate income tax rate in Ukraine is at 18%. And, the Withholding Tax (WHT) is at the rate of 15%. This applies to all of the passive income payments made to non-residents. Note that, an exemption or lower rate can be given under a Double Taxation Treaty.
The good news is that Ukraine has signed over 75 Double Taxation Treaties. Furthermore, the country has ratified the Multilateral Instrument (MLI). That means if another nation and Ukraine decide to apply the Multilateral Instrument to their Double Taxation Treaty, the modification of the provisions of the Double Taxation Treaty by the MLI is possible.
Corporate Income Tax rates for gambling and insurance activities
On top of the general Corporate Income Tax which is at the rate of 18%, companies that are in the insurance business will pay 0% special CIT and 3% on their income. Note that only insurance premiums that are long-term; under voluntary pension; and voluntary medical insurance, will be liable to the 0% rate. The 3% will be charged to all premiums except contributions on reinsurance, payments, and premiums acquired by the company. You should know that such rates of CIT at 0% or 3% decrease the CIT base of the company which is at the standard rate of 18%.
An organization of lotteries in Ukraine is charged at a rate of 28% in 2020 (which will become 30% in 2021). Companies involved in the operation of gambling machines are subject to a rate of 10% while other gambling activities attract a rate of 18%. As opposed to the CIT for insurance firms, the 10% or 18% CIT amounts charged on the gambling incomes does not decrease the taxable profit of the gambling company. The standard CIT rate of 18% will be charged on the full figure of the taxable profit.
In Ukraine, the tax reporting year follows the calendar year. This is applied to every other business except for agricultural manufacturers (those who are not on simplified tax). The reporting periods for the agricultural manufacturers begin from the month of July to June of the following year.
- Companies should submit their CIT tax returns every quarter of the year. However, some of the taxpayers such as new agricultural producers and taxpayers with a previous annual income of UAH 20 million or less can submit annually. This figure of UAH 20 million will be changed to UAH 40 million beginning from 2021.
- A company's monthly returns such as VAT should be filed in less than 20 calendar days i.e. before the end of the reporting month.
- With regard to quarterly returns, they should be submitted in less than 40 calendar days. This should be before the deadline of the reporting quarter. In the fourth quarter, the deadline for submitting CIT returns (in continuation with the quarterly reporting) is within 60 calendar days soon after the end of the reporting year. This also applies to annual returns such as CIT returns that are submitted on a yearly basis.
- Taxpayers are also required to provide their financial statements to the Ukrainian tax authorities.
- Both resident and non-resident companies with a PE in the state should keep records that fully comply with the country's tax rules.
Payment of tax
- For all the taxes payable, if assessed on the grounds of tax returns, they should be paid in less than 10 calendar days. This should be before the due date for filing the necessary tax returns.
- Beginning in January of 2021, Ukraine will enable the use of a unified tax account. From that period it will be possible to pay Corporate Income Tax (CIT), Personal Income tax (PIT), Unified Social Contribution (USC), and other payments via the unified tax account. The control of this account will be in the hands of the Ukrainian State Tax Service. You should however note that VAT payments, and alcohol and fuel excise tax won't have access to this account.
- Companies will be able to use the unified tax account on the next business day after they have submitted a notification that reveals their wish to use the account. In the event that the taxpayer wants to stop using the account, the authorities will terminate it beginning from the 1st day of January of the next calendar year.
- For at least once a year, the taxpayer has the chance to inform the authorities whether to terminate or continue using the unified account.