Law of Ukraine

"On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine Relating to Passive Income"

Date of entry into force:
August 1, 2014

Amendments to Article 164, paragraph 164.2, sub-paragraph 164.2.8 of the Tax Code of Ukraine clarify the item taxed by the individual income tax, in the part related to taxing income in the form of interest, dividends, winnings, and prizes.

According to amended Article 167, paragraph 167.1 of the Tax Code of Ukraine, the individual income tax rate of 15% is applied to income in the form of:
  • interest accrued on the amount of current or investment (deposit) bank account;
  • interest or discount income on savings (deposit) certificates;
  • interests on investment (deposit) of a credit union member in a credit union;
  • payment (percentage) distributed to share contributions of a credit union members;
  • income paid by a company managing the assets of a mutual investment institute for assets in place, according to law;
  • income on mortgage securities (mortgage bonds and certificates), according to law;
  • income in form of interest (discount) received by bond holders from bond issuer, according to law;
  • income on certificates of a real estate transactions fund.

According to the new version of Article 167, paragraph 167.2 of the Tax Code of Ukraine, the individual income tax rate is 5% of the taxed item in cases directly determined by Section IV "Individual Income Tax" of the Tax Code of Ukraine.

The Law supplements Article 170, paragraph 170.2, sub-paragraph 170.2.9 of the Tax Code of Ukraine with a new provision, according to which a tax agent, during each accrual for an investment income payer, accrues (withholds) individual tax, at the rates determined by Article 167, paragraph 167.1 of the Tax Code of Ukraine, and pays (transfers) the withheld tax to the budget during each accrual of such income, which does not relieve the tax payer from submitting an annual tax declaration with statement of the appropriate income received.

The Law presents a new version of Article 170, paragraphs 170.4 and 170.5 of the Tax Code of Ukraine, which determines the specifics of taxing interests and dividends with individual income tax.

The Law supplements Article 29, part 2 of the Budget Code of Ukraine with a new paragraph 1-1, according to which the revenues of the general fund of the State Budget of Ukraine also include individual income tax levied from incomes accrued in the form of interest on current or deposit (investment) bank accounts, and interest on investment (deposit) of a credit union member in a credit union, paid (transferred) according to the Tax Code of Ukraine.

The new version of Article 65 of the Budget Code of Ukraine establishes the following:
  • 50% of individual income tax (except for tax determined in Article 29, part 2, paragraph 1-1 of the Budget Code of Ukraine) paid (transferred) according to the Tax Code of Ukraine on the territory of the city of Kyiv is included in the revenues of the budget of the city of Kyiv. 100% of individual income (except for tax determined in Article 29, part 2, paragraph 1-1 of the Budget Code of Ukraine) paid (transferred) according to the Tax Code of Ukraine on the territory of the city of Sevastopol is included in the incomes of the budget of the city of Sevastopol;
  • 75% of individual income tax (except for tax determined in Article 29, part 2, paragraph 1-1 of the Budget Code of Ukraine) paid (transferred) according to the Tax Code of Ukraine on the territories of cities of republican importance in the Autonomous Republic of Crimea and cities of regional importance is included in the revenues of the budgets of such cities.
  • 25% of individual income tax (except for tax determined in Article 29, part 2, paragraph 1-1 of the Budget Code of Ukraine) paid (transferred) according to the Tax Code of Ukraine on the territories of villages, village associations, townships, and cities of district importance is included in the revenues of the budgets of such territories.

The Law amends Article 62 from the Law of Ukraine "On Banks and Banking" to exclude a provision according to which the bank has the right to disclose information that contains banking secrets to the central executive authority implementing state tax policy, in the context of the banks submitting tax calculation of interest income accrued (paid) to a natural person.
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