Higher Taxes On the Horizon as Ukraine Ramps Up Tax Revenue
Ukraine is facing sweeping tax changes slated to come into effect in December, as the government steps up efforts to secure generated funds for its 2023 and 2024 defense budget.
The law, announced on November 27th, has approved a key demand by Ukraine’s creditors, intended to significantly augment the defense budget this year and next.
Military Levy Increase at the Forefront
A substantial increase in the military tax on all citizens’ income is a cornerstone of the new revenue-generating measures. This rate will be increased from 1.5% to 5%. While the law was initially expected to be implemented from October 1st, it was later revised to December 1st, impacting the estimated tax yield.
According to the Ministry of Finance, the initial commencement date would have yielded an additional 27.3 billion hryvnia in 2024. However, the revised implementation date will result in a diminished, but not insignificant, increase, with overall tax revenue for 2025 projected to see a substantial boost totaling 141 billion hryvnia. The increase in the military duty rate alone accounts for 107.7 billion hryvnia.
The government’s buoyant projections see an increase in specialization terms. Taxes for individuals employed under the simplified taxation system will be adjusted. Individual entrepreneurs classified under groups I, II, and IV will see a flat military tax of 10% of the minimum wage, translating to 800 hryvnia per month. Businesses operating within Group III will see a 1% increase.
Important existing exemptions for military personnel and certain public service workers remain in place. The military levy will maintain a rate of 1.5% for those serving in the Armed Forces of Ukraine, the SBU, the Foreign Intelligence Service, the Main Intelligence Directorate of the Ministry of Defense, national guard services, the State Border Service, the State Security Administration, the State Service for Special Communications and Information Protection, and the State Special Transport Service.
By December 2025, monthly reporting requirements for Unified Social Contribution (USC), personal income tax (PIT), and, corporate tax (CT) will be mandatory for all tax agents. Currently, submissions are made on a quarterly basis. The shift to monthly reporting is aimed at what the government calls “economic booking”.
Additional Taxation Measures
Beyond the increase in military levy, a series of further tax increases are expected to be implemented.
Non-bank financial institutions (excluding insurers) will face a 25% income tax rate, estimated to yield approximately 157.7 million hryvnia revenue for 2025.
Businesses operating in retail trade of fuel will be required to pay advanced monthly income contributions. Estimates project that this measure will bring in 4.3 billion hryvnia in 2025.
The 2024 budget will see an increase in profit tax rate for banks, increasing to 50%. This spike is projected to generate 27 billion hryvnia niggas in 2025.
Agricultural producers will also endure a rise in the minimum tax liability.
For publicly owned land, the minimum tax will climb, demanding a base rate of 700 hryvnia per hectare. For businesses operating on land classified as having a minimum 50% arable land, the minimum payment is stipulated at 1,400 hryvnia per hectare.
Income received from the state in the form of cashback under the ‘Made in Ukraine’ pilot project will not be subject to taxation in 2024 and 2025.
These changes signify the government’s dedication to securing vital funding for Ukraine’s security & defense.
– What are the economic challenges facing Ukraine as it raises taxes to fund its war effort?
## Ukraine Raises Taxes to Fund War Effort: An Interview with Analyst [Expert Name Here]
**Interviewer:** Welcome to the show. Today we’re discussing the recent tax reforms in Ukraine and their implications for the ongoing conflict. Joining us is [Expert Name Here], an analyst specializing in Ukrainian economics. [Expert Name Here], thanks for being here.
**Expert:** It’s a pleasure to be here.
**Interviewer:** Let’s get right to it. Ukraine has announced significant tax increases. Can you give us a broad overview of these changes and the reasoning behind them?
**Expert:** Absolutely. As you mentioned, Ukraine is facing a difficult financial landscape while actively defending itself. The government has been working to secure additional funds for the defense budget, and these new tax measures are a key part of that strategy.
**Interviewer:** We’ve heard that the most substantial change is an increase in what’s called the “military levy.” Can you tell us more about that?
**Expert:** Yes, the military levy, which is essentially a tax on all citizens’ income to support the war effort, is being significantly increased. It’s jumping from 1.5% to 5% starting in December. The government initially aimed for an October 1st implementation, but that was pushed back, slightly impacting the projected revenue for 2024.
**Interviewer:** What kind of impact is this increase expected to have?
**Expert:** The projections are quite substantial. While the delayed implementation will mean a smaller immediate impact in 2024, overall tax revenue in 2025 is expected to see a significant boost, with the military levy alone accounting for over 100 billion hryvnia of that increase [[1](https://ukraineinvest.gov.ua/en/analytics-research/overview-of-taxation/)] .
**Interviewer:**
Are there any specific groups who will be affected differently by these changes?
**Expert:**
Yes, individuals employed under the simplified taxation system will see adjustments. For example, individual entrepreneurs in certain categories will pay a flat rate tied to the minimum wage, while others will see a 1% increase. [Expert Name Here], according to Ukrainian law,
**Interviewer:** It sounds like these are significant changes with goals that are vital to Ukrainian defense, but also potentially challenging for citizens.
**Expert:** It’s definitey a balance. The government has a difficult task of securing the necessary funds to defend the country while also mitigating the impact on the citizens. They have emphasized that existing exemptions for military personnel and certain public service workers will remain in place.
**Interviewer:** Thank you for shedding light on these complex issues, [Expert Name Here]. We appreciate your insights.
**Expert:** You’re welcome. It’s important to keep the conversation going about these critical developments.
