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Ukraine: Ukraine enacts a package of anti-crisis tax changes

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Vladimir Kotenko


Iryna Kalyta

In an effort to fire-fight the treasury crisis, on March 27 2014 the Ukrainian Parliament passed law No. 4576 increasing tax rates and abolishing a number of tax exemptions. The majority of changes introduced by this law are supposed to take effect from April 1 2014. The new rules include:

  • Freezing the corporate profit tax rate and the VAT rate at their current level (18% and 20% respectively), instead of the initially planned gradual reduction to 16% and 17% respectively by 2016).

  • Introduction of 7% VAT on supply of pharmaceuticals and selected medical products (as opposed to existing VAT exemption). Tax treatment of importation of pharmaceuticals and medical products remains unclear (7% was apparently meant but poor wording of the law creates a risk of 20% VAT upon importation).

  • Re-introduction of a special purpose pension fund levy of 0.5% to be imposed on legal entities and individuals upon purchase of foreign currency.

  • Increase of rates of the following taxes and charges:

  • Excise tax on alcohol, tobacco, oil products and vehicles;

  • Air emission tax and waste dumping tax;

  • Radio frequency charge;

  • Special water use charge;

  • Land tax; and

  • Rates of subsoil duty.

  • Introduction of progressive personal income tax (PIT) rates of 15%, 17%, 20% and 25% on passive income of individuals (dividends, interest, and royalties). This rule will take effect starting July 2014.

More changes in tax regulations are expected, including those abolishing other tax exemptions.

Vladimir Kotenko (vladimir.kotenko@ua.ey.com) and Iryna Kalyta (iryna.kalyta@ua.ey.com)

EY

Tel: +380 44 490 3000

Fax: +380 44 490 3030

Website: www.ey.com/ua

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