In Ukraine, individual taxation encompasses both residents and nonresidents, with residents taxed on their worldwide income and nonresidents taxed solely on income sourced within Ukraine. The tax system includes personal income tax, military tax, real estate tax, and taxes on passive incomes and succession. Personal income tax rates can vary, with specific provisions for different types of income. Real estate is subject to property tax, which includes both annual taxes on ownership and transfer taxes. Succession taxes apply to inheritances and gifts, with varying taxation based on the relationship between parties and residency status. The current article and presentation will explore these aspects, providing a detailed overview of individual tax obligations in Ukraine.

Low personal income taxes

• Standard Rate is 19.5 percent (18 percent Personal income tax (PIT) and 1.5 percent Military Tax)
• Reduced PIT on dividends from Ukrainian sources -5 percent PIT + 1.5 percent Military Tax
• Reduced PIT on dividends from foreign sources and dividends paid by Ukrainian investment funds – 9 percent PIT +1.5 percent Military Tax
• The number of deductible allowances
• 0 percent on sale of residential real estate and certain land plots
• Self-employed can opt for payment of 5 percent single tax
• Special system for IT specialists – 5 percent PIT and 1.5 percent Military Tax
• No inheritance tax on succession to close relatives
• No taxation of stock option granting, vesting and exercising
• No exit tax
• No wealth tax
• AEOI is postponed until the war situation is resolved
• Possibility to receive incomes outside of Ukraine, while being a tax resident of Ukraine
• Access to more than 80 double-tax treaties

General personal income taxation

• Tax residents of Ukraine are taxed on their worldwide income, unless an applicable double-taxation treaty provides other rules regarding foreign income.
• Nonresidents are subject to Ukrainian tax solely on their Ukrainian-source income.
• The concept of a “tax resident” for individuals in Ukraine closely aligns with the OECD’s approach.
• The same PIT rates apply to both tax residents and nonresidents, with certain exceptions.
• The standard PIT rate is 18 percent PIT + 1.5 percent Military Tax applicable to all cash and in-kind incomes (i.e., employment, contract remuneration, rent, foreign incomes, etc.), unless a special favorable regime applies or the asset is not considered to be a taxable income.
• Passive incomes such as capital gains, interest, royalties are also subject to 18 percent PIT and 1.5 percent Military Tax.
• Ukrainian-source dividends are taxed at the rate of 5 percent PIT and 1.5 percent Military Tax, while foreign source dividends and dividends paid by Ukrainian investment funds are subject to 9 percent PIT and 1.5 percent Military Tax. Payments that deemed as “non-ordinary” dividends are taxed as other incomes under 18 percent PIT and 1.5 percent Military Tax.
• Ukrainian employers and other Ukrainian tax agents are responsible for tax withholding PIT and Military Tax.
• If a tax resident has foreign source incomes and/or incomes not reportable by Ukrainian tax agents, he/she must self-assess PIT and Military Tax from such incomes by filing an annual tax return by April 30 of the year following the reporting year.
• There are a number of permitted deductions that could be claimed by tax residents; these include mortgage, health and life insurance, payments for education within Ukraine, some medical services. Temporarily, a tax resident of Ukraine can partially deduct charitable aid/donations granted for military purposes or a non-targeted charitable aid to individuals effected by the war.
• Ukrainian tax residents who directly or indirectly own and/or control foreign companies (CFC) must report these companies to the Ukrainian tax administration and pay personal income tax on the undistributed incomes earned by such CFCs if the annual income of all CFCs exceed €2 million.
• A tax resident of Ukraine can offset foreign tax paid abroad against Ukrainian PIT liabilities or can be exempt from taxation in Ukraine on specific foreign source income under relevant double-tax treaty.

Taxation of real estate

Sale of residential real estate (RE)

Proceeds from the sale of residential RE (i.e., a house, flat, share of a house or flat, cottage, or an unfinished construction) are exempt from taxation if it is the first sale of the year and the asset has been owned by both resident and non-resident individuals for more than three years. This three-year ownership condition does not apply to inherited property sales. The sale of a second RE within the same calendar year is subject to a 5 percent tax rate for tax residents. The third and subsequent sales of residential real estate by tax residents within the same calendar year is subject to 18 percent PIT. 18 percent PIT applies to non-residents if they own real estate less than three years and any subsequent sales within the same calendar year. In addition to PIT, profit derived from the sale of residential RE will be also subject to 1.5 percent Military Tax. PIT and Military tax is levied on the positive difference between the fair market value of the RE object and the confirmed expenses. The tax must be paid before the notarization of the sale-purchase agreement.

Sale of commercial RE

Income from the sale of commercial real estate (i.e., office spaces, parking spots, warehouses, etc.) is taxed at a rate of 5 percent even on the first sale of the year. An 18 percent PIT applies to subsequent sales of commercial RE object within the same calendar year. In addition to PIT, profit derived from the sale of commercial RE will also be subject to 1.5 percent Military Tax. PIT and Military tax is levied on the positive difference between the fair market value of the RE object and the confirmed expenses. The tax must be paid before the notarization of the sale-purchase agreement.

Charges imposed on sale of RE

A buyer of any RE object is liable to pay a 1 percent charge to the Pension Fund of Ukraine levied on the contractual value of the RE.

The notary fee for supporting and certifying RE sale transaction cannot be less than 1 percent of the contract value of the RE.

Annual real estate tax

Almost all owners of residential and commercial properties owned by individuals are subject to annual real estate tax (RET).

The tax base is determined by the total area of the property. Individuals receive a partial RET exemption for residential properties: the first 60 m2 for flats or 120 m2 for single-family homes are exempt (180 m2 combined for various types of immovable property).

Local governments set the RET rate, which generally cannot exceed 1.5 percent of the minimum salary per m2 as of January 1 of the reporting year (e.g. for 2024, max. RET is UAH 106 per m2). If an individual owns one or more residential properties, and any single property exceeds 300 m2 (for an apartment) or 500 m2 (for a house), the tax will be increased by UAH 25,000 per year for each such property.

Annual RET due for the respective calendar year is determined and provided by a tax authority and must be paid by individuals within 60 days of receiving a tax assessment.

Income from rent of RE

Profits derived be individuals from renting out of RE objects are subject to 18 percent PIT and 1.5 percent Military Tax. Usually, taxes are assessed on annual basis and self-reported by owners in their annual tax return by filling an annual tax return by 30 April of the year following the reporting year.

Nonresident individuals can rent out their property in Ukraine only through Ukrainian tax agents.

Inheritance and gift taxes

• Cash and any property received as inheritance or gifts are subject to PIT and Military Tax at the following rates:
  • 0 percent if received from a deceased person’s/grantor’s immediate family members (spouse, child, parent, sibling, grandparent, and grandchild).
  • 5 percent if received from a deceased person/grantor other than those mentioned above.
  • 18 percent if received from or by a nonresident deceased person/grantor, irrespective of their family relationship.
• Both Ukrainian and foreign residents are required to pay a stamp duty on the transfer of real estate objects and cars, that are located or registered in Ukraine, regardless of whether the transfer is by gift or inheritance.

Reduced PIT

• Tax residents who meet the requirements can register as a private entrepreneurs and opt for payment of a 5 percent single tax applicable to total revenue received from his/her business activities.
• Employees and gig-contractors of Ukrainian IT companies registered in Ukraine as residents of Diia City apply 5 percent PIT and 1.5 percent Military Tax on their remunerations.

Foreign tax relief

• Ukraine has established double-tax treaties with approximately 80 foreign countries.
• Under these treaties, tax residents of Ukraine can be exempt from taxation in Ukraine regarding certain foreign incomes or offset foreign taxes paid on income earned abroad against their Ukrainian PIT liabilities, provided such provisions exist in the relevant double-tax treaty.
• To claim a foreign tax credit in Ukraine, an official confirmation from the foreign tax authority is required, and it must be legalized or stamped with an apostille.
• Credits against Military Tax are not permitted.

Transport tax

• A local transport tax is charged on owners of passenger cars with an average market value exceeding approx. €62,000 (for 2024) and less than five years old.
• A tax of UAH 25,000 (approx. €582) for each car per year should be paid by a car owner.

Payroll taxes

• All Ukrainian employers and businesses that compensate individuals under employment agreements or civil law contracts are required to pay the unified social contribution (USC) at a rate of 22 percent of the gross remuneration, at their own expense.
• Employees are exempt from paying USC.
• Individuals registered as private entrepreneurs are liable to pay minimal USG.

Contact our team for more insights on PIT in Ukraine.