Ukraine Tax Code Is Finalized For Parliament

by Tatiana Smolenskaya, Tax-News.com, Moscow

23 September 2010

A final version of the Ukraine's new tax code has been approved in cabinet and has been presented for approval by the Verkhovna Rada - the parliament of the Ukraine.

A drafting committee was set up to incorporate the last minute adjustments discussed by cabinet and to take into account the President’s concerns with regard to protection of taxpayers’ rights.

The document consists of 19 chapters and 340 articles, most of which would come into effect on January 1, 2011, and lays down both national and local taxes and duties as well as their administration. It reduces the number of national taxes and duties from 29 to 19 and local taxes from 14 to 4 (real-estate tax, fees for business operations, car parking fees, and tourism fees).

The headline elements to the code are as follows:

• Corporate income tax to be reduced progressively from 25% to 16% by 2016 - 19% in 2011-12, 18% in 2013-14, 17% in 2015;
• Value-added tax to be reduced from 20% to 17% in 2014 and introduction of automatic refunds;
• 15% personal income tax for all people with monthly incomes not exceeding 10 minimum wages and 17% for those on higher incomes;
• 5% tax to be introduced on bank deposits where monthly interest exceeds 2 minimum wages (deposits exceeding about UAH 200,000 - USD25,000);
• Tax on real estate to be introduced as uniform local tax set at a factor of 0.5-1.5 of UAH10 per square metre or a zero tax rate for residential real estate of up to 100 square metres area in cities and 200 square metres in rural areas - the zero rate is reduced to 40 square metres if more than 2 people (cities) or 5 people (rural) reside there;
• Five year zero rate of corporate income tax for newly established and small businesses with annual turnover of up to UAH3m (UAH300,000 for sole traders); and
• Certain light industrial businesses, hotels, shipbuilding, and aircraft manufacturing to be exempted from corporate income tax for 10 years.

Borys Kolesnikov, deputy prime minister of the Ukraine said he expects the legislation process to be completed in October 2010 so that the 2011 budget can be approved on the basis of the new code. Earlier the Ukrainian parliament had deferred a decision on the budget until the tax code was implemented. Kolesnikov said nothing stood in the way of a timely adoption of the draft budget bill for 2011, and a “costed macro budget” had been agreed with world financing bodies.

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