The Law of Ukraine
On Personal Income Tax
Date of Entry into Force:
January 1, 2004
This Law defines legal principles of personal income tax levy in Ukraine. According to the Law of Ukraine “On Taxation System”, personal income tax belongs to the state taxes and fees (mandatory payments). State taxes and fees (mandatory payments) shall be established by the Verkhovna Rada of Ukraine and shall be collected throughout the entire territory of Ukraine.
Taxpayers of personal income tax shall be:
resident which receives income originating from Ukraine, as well as foreign income;
non-resident which receives income originating from Ukraine.
Taxpayer of personal income tax shall not be non-resident which receives income originating from Ukraine and enjoys diplomatic privileges and immunities mutually set by the international agreement regarding income directly received by it from such diplomatic or other activity equated with it by such international agreement, which was approved as obligatory by the Verkhovna Rada of Ukraine.
The object of taxation of resident shall be:
total monthly taxable income;
net annual taxable income which is defined by decrease of total annual taxable income to the amount of tax credit of such accounting year;
income originating from Ukraine, which shall be subject to final taxation during their payment;
The object of taxation of non-resident shall be:
total monthly taxable income originating from Ukraine;
total annual taxable income originating from Ukraine;
income originating from Ukraine, which shall be subject to final taxation during their payment.
Personal income tax rate shall be:
13 per cent of the object of taxation - from January 1, 2004 until December 31, 2006;
15 per cent of the object of taxation - from January 1, 2007.
Interest on deposit (holdings) with the bank or non-bank financial establishment according to the law (except insurers), as well as interest or discount income by saving (deposit) certificate, shall be taxable at the rate 5 per cent from the object of taxation.
Tax rate shall make double rate amount from the object of taxation calculated as winnings or prize (except in state lottery in monetary form).
The taxpayer's total monthly taxable income, obtained on the territory of Ukraine from one employer in the form of salary, may be decreased to the sum of social tax allowance in the following amounts:
one minimum salary - for any taxpayer:
1.5 minimum salaries - for the taxpayer who is a single mother or father; supports the child - disabled of group I or II; has three or more children under 18 years old; is a widower or a widow; pupil, student, post-graduate student, attending physician; post-graduated in a military academy; military man doing military service for a fixed period; disabled of group I or II, suffered form Chornobyl catastrophe;
2 minimum salaries - for the taxpayer who is the Hero of Ukraine; the Hero of Soviet Union; participant of military actions during the Second World War; former prisoner of concentration camps; the person who was forcedly removed form the territory of former USSR during the Second World War; the person who stayed in blockade territory of former Leningrad (Saint-Petersburg, the Russian Federation) in the period from September 8, 1941 until January 27, 1944.
The Law defines special taxation procedure for income from granting real estate in lease (sub-lease), taxation of interests, dividends, royalties, winnings and prizes, investment profit, charity aid, income obtained by the long-term life insurance and non-state pension insurance agreements, foreign income, incomes obtained by the natural person - subject of entrepreneurial activity or natural person who pays market duty.
Tax obtained from non-residents' income shall be calculated to the budget according to norms of Budget Code of Ukraine.
The person responsible for calculation, deduction and payment (transfer) to the budget of tax from income in the form of salary shall be the employer (self-employed person) which pays such income in favor of the taxpayer (such self-employed person).
The person responsible for calculation, deduction and payment (transfer) to the budget of tax from other income shall be:
a) tax agent - for taxation of income originating from Ukraine;
b) taxpayer, recipient of such income - for foreign income and income which originate from the persons exempted from calculation, deduction or payment (transfer) of tax to the budget;
c) such taxpayer - for income which is paid in favor of taxpayer by natural persons.
If the international agreement, which was approved as compulsory by the Verkhovna Rada of Ukraine, sets the rules other than those envisaged by this Law, the norms of such international agreement shall be applied as regards to the subjects liable thereof.