Military duty, minimum tax liability and abolition of benefits: what awaits Ukrainians in 2025
16 December 2024 15:21
ANALYSIS
On December 1, 2024, the Law “On Amendments to the Tax Code of Ukraine on Peculiarities of Taxation during the Period of Martial Law” came into force in Ukraine. This document caused a wide response due to significant changes in tax policy that will affect both individuals and businesses. What’s new and how much Ukrainians will have to pay out of their own wallets in 2025 "Komersant Ukrainian" figured it out together with a lawyer.
The end of this year was full of various changes to the current legislation of Ukraine. The tax sphere was not left out of the attention of MPs. Today, Ukrainians need to prepare for new realities, says Andriy Shabelnikov, Managing Partner of EvrikaLaw and Chairman of the National Bar Association’s Committee on Investment and Privatization.
“Let’s recall the lively discussions of the draft law 11416-d, which some experts call historic in terms of tax increases. The document was repeatedly revised and amended during its consideration by the Verkhovna Rada of Ukraine, and business representatives repeatedly pointed out the expediency of the draft law and its negative impact on the country’s economy,”
– says Andrii Shabelnikov
Moreover, the fact that the President of Ukraine did not sign the historic draft law 11416-d for more than a month became resonant. As a result, lawyers and tax consultants faced the problem of applying the provisions of the draft law, which were supposed to be effective “retroactively,” says Andriy Shabelnikov. Despite the expectation that the President of Ukraine would veto the draft law with significant shortcomings, the law was signed on November 28 and came into force on December 1, 2024.
What awaits us in the field of taxation in 2025
Increase in the military tax:
- For all categories of the population (except for military personnel), the tax rate has been increased.
- The military tax now applies to individual entrepreneurs:
- Individualentrepreneurs of groups 1, 2 and 4 will pay 10% of the minimum wage (starting from January 1, 2025 – UAH 800 per month).
- Group 3 sole proprietors will pay 1% of their income. For example, if the income for the reporting period is UAH 200,000, the amount of the fee is UAH 2,000.
Increase in income tax:
- For banks – up to 50%.
- For other financial institutions – up to 25%.
Minimum tax liability for landowners:
- Starting from January 1, 2025, the minimum tax amount will be UAH 700 per hectare. For plots with more than 50% of arable land, the minimum tax liability will be UAH 1400 per hectare.
Abolition of the unified social tax exemption:
- Individual entrepreneurs will no longer be exempt from paying the unified social tax for themselves during martial law. The monthly payment will be UAH 1760, and the annual payment will be UAH 21,120.
“This significantly increases the financial burden on small businesses, which are already in a difficult situation due to the economic crisis,”
– said Andriy Shabelnikov.
Monthly reporting:
- Starting from 2025, the obligation to report on personal income tax, unified social tax and military duty on a monthly basis will be introduced.
Additional changes and adjustments
To eliminate the shortcomings, the Verkhovna Rada adopted draft law No. 9319. It provides for:
- Exemption of sole proprietors of groups 1 and 2 who do not have employees from paying military duty during vacation or sick leave.
- Clarification that the obligation to pay the military fee for all sole proprietors arises only from January 1, 2025, and not retroactively.
- Introduction of benefits for taxpayers located in the temporarily occupied territories.
What should businesses expect
According to Andriy Shabelnikov, 2025 will be a serious challenge for entrepreneurs:
“In 2025, businesses will face a significant tax burden. This, in turn, may harm the efficiency of domestic enterprises and the shadowing of the economy.”
Andriy Shabelnikov
Thus, innovations in the tax sphere in 2025 significantly change the conditions for business. Entrepreneurs should closely monitor legislative changes to avoid mistakes in reporting and adapt to the new realities in time.
“It should also be understood that we are still at war, so additional tax increases are quite possible. In particular, the possibility of increasing the VAT rate is already being considered. Therefore, businesses need to be prepared for new challenges,”
– summarizes Andriy Shabelnikov.
What the authorities say
The tax increase in 2024 will provide an additional UAH 140 billion to the budget in 2025, and no new tax increases are currently planned. This was stated by the Chairman of the Verkhovna Rada Committee on Finance, Taxation and Customs Policy Danylo Hetmantsev.
According to him, Ukraine remains at war, which means a high level of uncertainty. However, the possibility of revising the tax policy may arise only if the fiscal gap increases significantly.
“Given the uncertainty, I do not rule out a return to this issue in case of a significant increase in the fiscal gap. So far, we do not see such preconditions at all,”
– Mr. Hetmantsev emphasized.
He also noted that the decision on possible changes in the tax policy will depend on several factors, including the situation at the frontline and the situation of refugees.
“However, we have already calculated the budget for 2025 according to the baseline scenario. There is no need for an additional increase in VAT or other taxes,”
– emphasized the head of the parliamentary committee.
Thus, so far, the government is adhering to the tax changes adopted in 2024, which have already been included in the budget for 2025. However, Mr. Hetmantsev emphasized that the development of events in the country can be quite dynamic, which leaves room for adjustments to the plans if necessary.
