Ukraine's tax hike law sent to President Zelenskyy for signature

The law on increasing taxes was submitted to President Volodymyr Zelenskyy for signature on Tuesday, October 15, according to the parliament's website.

The law consists of two main parts: an increase in the military levy and an increase in the tax on bank profits.

The military levy for employed workers will rise to 5% (from the current 1.5%), while the levy for military personnel will remain unchanged.

If a company has already paid an advance on salaries and the military levy at the old rate, the second part of the salary will be taxed at the new rate, explained the head of the tax committee, Danil Getmantsev, in an interview with Economic Pravda.

Additionally, sole proprietors (FOPs) will become payers of the military levy: the first, second, and fourth groups will pay 800 hryvnias ($19) per month, and the third group will pay an additional 1% of their income.

"FOPs have quarterly reporting. For the fourth quarter, they will submit it at the beginning of the next year and will then pay the new tax," Getmantsev said.

The second major block is a tax on excess bank profits at a rate of 50% for 2024.

"2024 is the most profitable year in the history of Ukraine's banking system. Why? Have they launched an innovative product? Have they increased lending to the economy? No, they are buying deposit certificates from the National Bank, which the NBU uses to absorb excess hryvnia from circulation, maintaining the hryvnia exchange rate. If the share of interest income in banks' revenues exceeds 50%, and the state allows banks to earn, then it is logical for the state to take part of these profits to protect these same banks from the aggressor," said the lawmaker.

In addition, the bill provides for an advance payment for gas stations and an increase in the corporate income tax rate for non-bank financial institutions starting in 2025.

The tax changes will take effect from the moment the law comes into force (for FOPs, from October 1).

According to the Ministry of Finance, the fiscal effect of the changes to the Tax Code in 2024 will be 21.6 billion hryvnias ($524 million) (of which 21.5 billion hryvnias will go to the state budget and 0.1 billion hryvnias to local budgets). 

For 2025, revenues are projected at 141.1 billion hryvnias ($3.4 billion) (of which 133.0 billion hryvnias will go to the state budget and 8.1 billion hryvnias to local budgets).