Ukraine - Ukrainian tax culture may complicate acquisitions
01 April 2008
The level of international interest in making acquisitions in Ukraine has increased enormously since the Orange Revolution in 2004. Still, many attempted deals have foundered due to tax issues, reveal Trevor Link and Yulia Logunova of Ernst & Young
Ukraine has a relatively conventional tax system, with corporate income tax of 25% and value added tax (VAT) of 20%. Personal income tax is a flat 15%, yet employer social security contributions are burdensome. There are also a large number of nuisance taxes and the overall tax compliance burden has been evaluated as one of the worst in the world. As in other former socialist countries, penalty levels can be very high – 100% of the unpaid tax is quite normal, and penalties for social security defaults can reach more than 300% of the tax base.
The normal limitation period is three years, though in cases of proven tax evasion earlier periods can be reopened as well.
Ukrainian tax culture
There are two sets of extreme tax behaviours typically encountered. Some businesses are ultra-conservative and will do almost anything to keep the tax authorities happy and avoid being penalised. Tax inspectors have...
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