Key tax changes in 2025

The taxation of residents of Diia City

On January 01, 2025, the amendments provided for by the Law of Ukraine dated December 04, 2024 No. 4113-IX “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Stimulating the Development of the Digital Economy in Ukraine” came into force, in particular, the following amendments concerning taxation of Diia City residents:

1. Corporate income tax:

• the following amounts are exempt from this tax: pension contributions within the non-state pension provision and insurance payments under voluntary health insurance contracts paid by a Diia City resident (taxpayer on special conditions) at its own expense to an employee/gig-specialist within 30% of the accrued salary/remuneration;
• during the period of martial law, transactions on transfer of funds, free transfer of goods/works/services to the Armed Forces of Ukraine and other state bodies, military formations, healthcare institutions for the purposes of ensuring the defense of the state and humanitarian assistance are not subject to corporate income tax for Diia City residents (taxpayers on special conditions).

1. Personal income tax (“PIT”):

• it is clarified that the income of a specialist accrued (paid) to him/her by a resident of Diia City is subject to PIT at the rate of 5% starting from the calendar month following the calendar month in which the status of a resident of Diia City was acquired. Such income accrued (paid) in the calendar month in which the status of a Diia City resident is acquired shall be taxed at the PIT rate of 18%;
• tax agents that have acquired the status of Diia City resident are allowed to pay PIT at the rate of 5% until December 31 of the calendar year following the calendar year in which they acquired such status, even if they do not meet the requirements for the average number of employees and gig- specialists. 

However, if such tax agents continue to fail to meet the requirement for the average number of employees/gig-specialists after the deadline mentioned above, they will be obliged to independently calculate and pay at their own expense PIT at the rate of 18% on the income of specialists paid during the tax periods when the tax agent did not meet the specified requirement within the last 3 months of the calendar year following the calendar year in which the tax agent acquired the status of a resident of Diia City.

1. VAT:

• transactions involving the supply of services on the terms of a gig-contract by a non-resident who is not registered as a VAT payer in the customs territory of Ukraine are not subject to VAT.

The taxation of financial institutions and companies engaged in trading in foreign exchange

Starting from January 01, 2025, the basic corporate income tax rate is 25% for the purposes of:

• taxation of financial institution profits (except for an insurer);
• taxation of the adjusted profit of a controlled foreign company of a financial institution (except for an insurer);
• payment of corporate income tax obligation on dividends paid by a financial institution (except for an insurer).

It should be remindered that on the results of the tax (reporting) year 2024, the basic corporate income tax rate for the purposes of taxation of banks’ profits and payment of corporate income tax obligations on dividends by banks is 50%. 

Also, starting from January 01, 2025, the advance payment of corporate income tax for companies engaged in trading in currency exchange has been increased. The advance payment is calculated according to the official hryvnia exchange rate set by the National Bank of Ukraine on the first day of the first month of the calendar quarter in which the advance payment is made, for each foreign currency exchange office located:

• in a settlement (except for Kyiv) with a population of more than 50 thousand — in the equivalent of EUR 600;
• in Kyiv — in the equivalent of EUR 700;
• in other settlements — the equivalent of EUR 200.

Such changes are provided for by the Law of Ukraine No. 4015-IX dated October 10, 2024 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Ensuring the Balance of Budget Revenues during the Period of Martial Law”. 

The taxationof non-profit organizations and charitable donations collected by individuals

On December 30, 2024, the Law of Ukraine dated December 17, 2024 No. 4143-IX “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Exemption from Value Added Tax on Operations for Importation of Certain Defense Goods into the Customs Territory of Ukraine” came into force, which establishes that:

• payment of compensations and other payments in favor of employees of a charitable organization is not a ground for exclusion of such a charitable organization from the Register of Non-Profit Institutions and Organizations, if such compensations and other payments are related to the implementation of the goals and objectives of the charitable organization and are provided for in its constituent documents and do not contradict the law.

1. At the same time, the amount of compensation and other payments in the tax (reporting) year should not exceed 25% of the amount of administrative expenses incurred by such a charitable organization for the tax (reporting) year. 
2. It should be reminded that non-profit enterprises and institutions included in the Register of Non-Profit Institutions and Organizations are not corporate income tax payers;

• the amount (value) of a charitable donation received by individuals who collect donations on behalf of a charitable organization or for its benefit, on behalf of or for the benefit of other beneficiaries in the amount actually transferred to such charitable organization or beneficiary is not subject to PIT. 

The taxation of aircraft manufacturers

Starting from January 01, 2025, the following exemptions shall cease to be valid:

• exemption of aircraft manufacturers from VAT on imports of goods (except for excisable goods) used for the needs of the aircraft industry, supply of the results of research and development works performed for the needs of the aircraft industry in the customs territory of Ukraine;
• exemption from land tax for aircraft construction entities engaged in the development and/or manufacture with final assembly of aircraft and aircraft engines;
• exemption from corporate income tax on profits of aircraft manufacturers.

Peculiarities of payment of military duty and reporting

The Law of Ukraine No. 4113-IX dated December 04, 2024 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Stimulating the Development of the Digital Economy in Ukraine” provides for the following:

1. The military fee for single taxpayers shall be set from January 01, 2025 until December 31 of the year in which martial law is terminated. 
2. As a reminder, for individual entrepreneurs – single taxpayers of groups 1, 2 and 4, the military fee rate is 10% of the minimum wage, and for single taxpayers of group 3 – is 1% of income.
3. Starting from January 01, 2025, the 5% military fee will be applied to the income of individuals included in the total annual taxable income and the final calculation of which is made in the submitted annual tax return on property and income.

At the same time, the annual tax obligation for the military fee on personal income for the reporting (tax) year 2024, the final calculation of which is made in the submitted annual tax return on property and income, is determined at the military fee rate of 1.5% (except for certain cases). 

As a reminder, starting from January 1 of the year following the year in which martial law is terminated, the military fee rate for individuals will be 1.5%.

1. Individual entrepreneurs – single taxpayers of groups 1, 2 and 4 pay the military fee by making an advance payment no later than the 20th day of the month. Advance payments are charged by the controlling authorities. Failure to pay or payment not in full of such advance payments shall result in a fine of 50% of the military fee rate.
2. Single taxpayers of the 3rd group pay the military fee within 10 calendar days after the deadline for filing the single tax return for the tax (reporting) quarter. For violation of the rules of payment of the military fee, such persons shall be held liable in the form of a fine in the amounts specified in Article 124 of the Tax Code of Ukraine (“TCU”).
3. Individual entrepreneurs – single taxpayers of groups 1 and 2, whose tax address is located in the territories of hostilities or in the temporarily occupied territories, have the right not to pay the military fee for the period from the first day of the month in which hostilities began, the possibility of hostilities arose or the temporary occupation of such territory began, until the last day of the month in which they were completed.

Also, starting from January 01, 2025, the terms of reporting on personal income tax, single social contribution and military fee have been changed, namely from quarterly to monthly reporting. Such changes are provided for by the Law of Ukraine No. 4015-IX dated October 10, 2024 “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Ensuring the Balance of Budget Revenues during the Period of Martial Law”. 

Changes related to excise taxpayers

The Laws of Ukraine No. 2245-VIII dated December 07, 2017 “On Amendments to the Tax Code of Ukraine and Certain Legislative Acts of Ukraine on Ensuring the Balance of Budget Revenues in 2018” and No. 3878-IX dated July 18, 2024 “On Amendments to the Tax Code of Ukraine on Implementation of the Provisions of the European Union Excise Tax Acts” provide for a number of changes in the excise tax, which entered into force on June 01, 2025, in particular:

• the definition of the weighted average retail price of cigarettes is introduced. 

1. It is the price calculated from the sum of the total cost of all cigarettes sold by manufacturers in Ukraine and imported by importers into Ukraine for the period from January 1 to December 31 inclusive of the reporting year, divided by the sum of the total number of cigarettes sold by manufacturers and imported by importers for the same period, as determined in the excise tax declarations for January – December of the reporting year, in calculation per 1000 units;

• the Law establishes that the State Tax Service of Ukraine shall determine, based on the data of excise tax declarations, and publish on its official website, no later than March 1 of the year following the reporting year, the total amount of tax obligations for excise tax on cigarettes, the weighted average retail price of cigarettes and the indicator (in percentage terms) characterizing the share of the total amount of tax obligations for excise tax in the weighted average retail price of cigarettes;
• the share of the total amount of tax obligations on excise tax on cigarettes shall be not less than 60% of the weighted average retail price of cigarettes.

If the share of the total amount of tax obligations on excise tax on cigarettes for the previous year is less than 60% of the weighted average retail price of cigarettes for the same year, when determining the tax obligation on cigarettes under codes 2402 20 90 10, 2402 20 90 20 from April 1 to December 31 of the current year, the amount of excise tax shall not be less than the established minimum excise tax obligation multiplied by a coefficient of 1.1.

As a reminder, starting from January 01, 2025, the increased rates of excise tax on tobacco products, tobacco and industrial tobacco substitutes, and minimum excise tax obligation on tobacco products, as defined by the general provisions of the TCU (sub-clauses 215.3.2, 215.3.3 of clause 215.3 of article 215 of the TCU) and the increased rates of excise tax on fuel (clause 48 of subsection 5 of section XX of the TCU) are in force.

The effect of VAT and single social contribution exemptions

1. VAT

On December 30, 2024, the Law of Ukraine dated December 17, 2024 No. 4143-IX “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Exemption from Value Added Tax on Operations for the Importation of Certain Defense Goods into the Customs Territory of Ukraine” came into force, which provides for:

• extension until December 31 of the year in which martial law is terminated of the existing exemption from VAT on certain transactions in the field of cinematography (supply of national films, supply of works/services for their production, and a number of others);
• extension until January 01, 2026 of the existing VAT exemption for imports of drones and other goods specified in paragraphs 9-24 of Section XXI of the Customs Code of Ukraine.

Also, starting from January 01, 2025, the following exemptions will cease to be valid:

• VAT taxation at a zero rate on the cost of supply of goods (except for excisable goods) and services directly produced by enterprises and organizations of public associations of persons with disabilities, which are founded by public associations of persons with disabilities and are their property;
• granting by the controlling authority, at the request of the taxpayer, an installment plan for VAT payment for the period specified in the application, but not exceeding 24 calendar months, without interest, penalties and fines, when importing equipment and components classified under certain subcategories according to the Ukrainian Classification of Goods for Foreign Economic Activity;
• VAT at a rate of 7% on operations related to the provision of air transportation services for the domestic transportation of passengers and baggage.

1. Single social contribution 

The Law of Ukraine dated November 19, 2024 No. 4059-IX “On the State Budget of Ukraine for 2025” suspended for the year 2025 the provision that for the period from March 01, 2022 until the end of martial law in Ukraine and for 12 months after its termination provided the right not to charge, calculate and pay the singlesocial contribution for themselves for the following persons:

• individual entrepreneurs, including those who have chosen the simplified taxation system (except for electronic residents (e-residents);
• persons engaged in independent professional activities;
• members of a farming enterprise, unless they are subject to insurance on other grounds.

Transfer pricing issues

On January 01, 2025, the provisions of the Law of Ukraine dated 18.06.2024 No. 3813-IX “On Amendments to the Tax Code of Ukraine on Peculiarities of Tax Administration during Martial Law for Taxpayers with a High Level of Voluntary Compliance with Tax Legislation” came into force, which relate to controlled transactions and transfer pricing.

It is envisaged that business transactions with a non-resident whose legal form is included by the Cabinet of Ministers of Ukraine in the list of legal forms of non-residents, in the absence of certain criteria (in particular, transactions are not carried out with related non-residents, transactions for the sale and/or purchase of goods and services are not carried out through non-resident commission agents, etc) are considered uncontrolled if there is at least one of the following condition:

• the non-resident is a resident of a state with which Ukraine has concluded an international treaty for the avoidance of double taxation;
• all members (partners) of the non-resident are residents of states with which Ukraine has concluded international treaties for the avoidance of double taxation.

These conditions must be confirmed by submitting a certificate to the State Tax Service of Ukraine by October 1 of the year following the reporting year confirming that the non-resident or participants (partners) are residents of such a country (except for countries included in the list of states (territories) approved by the Cabinet of Ministers of Ukraine).

In case of changes to the list of organizational and legal forms, such changes shall apply from January 1 of the reporting year following the calendar year in which such changes were made.

Also, on March 25, 2025, the Law of Ukraine dated December 04, 2024 No. 4112-IX “On Amendments to the Tax Code of Ukraine and Certain Laws of Ukraine on the Implementation of the Recommendations of the Council of the Organization for Economic Cooperation and Development on Tax Measures to Further Combat Bribery of Foreign Officials in International Business Transactions” will come into force, which updates the penalties for certain violations in the field of transfer pricing, in particular:

• in case of failure to submit a notification of participation in an international group of companies, a fine of 100 amounts of the minimum subsistence for a person capable of working will be applied. Currently, such a fine is 50 amounts of the subsistence minimum;
• for each calendar day of untimely declaration of controlled transactions in the submitted report on controlled transactions, in case of submission of a clarifying report, a fine will be imposed in the amount of one subsistence minimum for a person capable of working, but not more than the amount equal to one of the two values, which is less, – or 300 subsistence minimums for a person capable of working, or 0.5 percent of the amount of controlled transactions undeclared in the submitted report on controlled transactions. Currently, the fine should not exceed 300 subsistence minimums;
• for each calendar day of late submission of the notification on participation in an international group of companies, a fine will be imposed – one size of the subsistence minimum for a person capable of working, but not more than 50 sizes of the subsistence minimum. Currently, the fine should not exceed 100 sixes of the minimum subsistence level.

If you have any questions about the operation of your business or need to obtain legal advice in connection with the tax changes, please do not hesitate to contact GOLAW and we will provide you with qualified legal assistance.