Payroll taxes from an employer in Ukraine
Taxation of personal income is regulated by the Tax Code of Ukraine (hereinafter referred to as TCU). Under the general taxation system, a personal income tax (PIT) is levied.
The procedure for paying PIT from income under an employment contract depends on three main factors:
- places of performance of labor activity (on the territory of Ukraine or abroad);
- the status of the employer (whether the employer is recognized as a tax agent);
- the tax status of the employee (whether an individual - the recipient of income is recognized as a tax resident in Ukraine).
Remuneration for the performance of labor duties in Ukraine is income from sources from Ukraine (Clause 14.1.54 of the TC U). And remuneration for the performance of labor duties outside Ukraine is income from sources outside Ukraine. At the same time, the place of performance of labor duties is determined not at the location of the employer, but at the place of work of the employee himself, taking into account the terms of his employment contract.
Recognition of wages as income from sources in Ukraine or income from sources outside Ukraine affects the procedure for taxation with income tax.
As a general rule, regardless of the place of employment, the Ukrainian employer is recognized as a tax agent in relation to the income of employees - both tax residents and non-residents. The tax agent must calculate, withhold and pay personal income tax to the budget (clause 171.1 of TC U).
At the same time, a foreign organization that has a branch or representative office, or other separate subdivision in Ukraine (clause 14.1.180 of the TC U) can also be recognized as a tax agent.
Procedure for declaring and paying tax
For personal income tax, two different tax periods are established: in the presence of a tax agent - a calendar quarter (clause 176.2 of the TCU); when paying tax by an individual on his own - a calendar year (clause 179.1 of the TCU).
As a general rule, if there is only income from work for a Ukrainian employer, if there are no tax deductions other than standard deductions, then the employee does not need to file a tax return.
The withheld personal income tax is paid by the tax agent - the employer simultaneously with the payment of income (clause 168.1.2 of the TCU). The employer also submits to the tax authority a calculation of the calculated personal income tax for each quarter (personal income tax reporting period for the tax agent) within 40 calendar days after the expiration of quarter (clauses 49.18.2, 176.2 of the TCU).
If there is income received from a person who is not a tax agent, or when claiming tax deductions, employees must submit a tax return by May 1 of the next year (Clause 49.18.4 of TCU). If there is a tax payable, in addition to that withheld by tax agents, it must be paid before August 1 of the next year (Clause 179.7 of TCU).
Tax calculation
For the purposes of personal income tax taxation, a number of social benefits are provided, for which the tax base for remuneration from labor activity is reduced (clauses 169.1, 169.4.1 of the TCU). In particular, the following social benefits are provided:
The social benefit is applied only by one employer on the basis of the employee's application for the benefit (clause 169.2.2 of the TCU).
In addition, there are tax credits (deductions), the application of which depends on the tax status of the employee (resident or non-resident), which is discussed in more detail below in the relevant section.
Income from the performance of labor activity is taxed at a rate of 18%, regardless of the tax status of both the employee and the employer (clause 167.1 of the TCU).
A special rate of 5% is provided for the income of specialists of residents of Action.City (Diiа.City) in the form of wages, remuneration for works commissioned and royalties in the range of €240,000 per year at the official hryvnia exchange rate at the beginning of the year (p. 170.14 -1 TC U). In case of excess of annual income from the corresponding amount of excess, personal income tax is payable at a rate of 18%, while the employee must independently submit an annual declaration and pay tax (170.14-1.3 TC U).
Employees under an employment contract in Ukraine do not pay a single social contribution, it is paid by the employer at the expense of his expenses at a rate of 22% (clause 5, article 8 of the Law of 08.07.2010 N 2464-VI).
At the same time, military levy (ML) is withheld in Ukraine at the rate of 1.5%.
The following describes the features of taxation of personal income tax on wages, depending on the tax status of an individual. A brief note on the criteria for a tax resident of Ukraine is also provided.
The procedure for paying PIT from income under an employment contract depends on three main factors:
- places of performance of labor activity (on the territory of Ukraine or abroad);
- the status of the employer (whether the employer is recognized as a tax agent);
- the tax status of the employee (whether an individual - the recipient of income is recognized as a tax resident in Ukraine).
Remuneration for the performance of labor duties in Ukraine is income from sources from Ukraine (Clause 14.1.54 of the TC U). And remuneration for the performance of labor duties outside Ukraine is income from sources outside Ukraine. At the same time, the place of performance of labor duties is determined not at the location of the employer, but at the place of work of the employee himself, taking into account the terms of his employment contract.
Recognition of wages as income from sources in Ukraine or income from sources outside Ukraine affects the procedure for taxation with income tax.
As a general rule, regardless of the place of employment, the Ukrainian employer is recognized as a tax agent in relation to the income of employees - both tax residents and non-residents. The tax agent must calculate, withhold and pay personal income tax to the budget (clause 171.1 of TC U).
At the same time, a foreign organization that has a branch or representative office, or other separate subdivision in Ukraine (clause 14.1.180 of the TC U) can also be recognized as a tax agent.
Procedure for declaring and paying tax
For personal income tax, two different tax periods are established: in the presence of a tax agent - a calendar quarter (clause 176.2 of the TCU); when paying tax by an individual on his own - a calendar year (clause 179.1 of the TCU).
As a general rule, if there is only income from work for a Ukrainian employer, if there are no tax deductions other than standard deductions, then the employee does not need to file a tax return.
The withheld personal income tax is paid by the tax agent - the employer simultaneously with the payment of income (clause 168.1.2 of the TCU). The employer also submits to the tax authority a calculation of the calculated personal income tax for each quarter (personal income tax reporting period for the tax agent) within 40 calendar days after the expiration of quarter (clauses 49.18.2, 176.2 of the TCU).
If there is income received from a person who is not a tax agent, or when claiming tax deductions, employees must submit a tax return by May 1 of the next year (Clause 49.18.4 of TCU). If there is a tax payable, in addition to that withheld by tax agents, it must be paid before August 1 of the next year (Clause 179.7 of TCU).
Tax calculation
For the purposes of personal income tax taxation, a number of social benefits are provided, for which the tax base for remuneration from labor activity is reduced (clauses 169.1, 169.4.1 of the TCU). In particular, the following social benefits are provided:
- 50% of the living wage for any individual;
- 100% of the subsistence minimum for a person with two or more children under the age of 18 - for each child;
- 150% of the subsistence minimum for a single parent (guardian, trustee) or in the presence of children with disabilities under the age of 18 - for each child.
The social benefit is applied only by one employer on the basis of the employee's application for the benefit (clause 169.2.2 of the TCU).
In addition, there are tax credits (deductions), the application of which depends on the tax status of the employee (resident or non-resident), which is discussed in more detail below in the relevant section.
Income from the performance of labor activity is taxed at a rate of 18%, regardless of the tax status of both the employee and the employer (clause 167.1 of the TCU).
A special rate of 5% is provided for the income of specialists of residents of Action.City (Diiа.City) in the form of wages, remuneration for works commissioned and royalties in the range of €240,000 per year at the official hryvnia exchange rate at the beginning of the year (p. 170.14 -1 TC U). In case of excess of annual income from the corresponding amount of excess, personal income tax is payable at a rate of 18%, while the employee must independently submit an annual declaration and pay tax (170.14-1.3 TC U).
Employees under an employment contract in Ukraine do not pay a single social contribution, it is paid by the employer at the expense of his expenses at a rate of 22% (clause 5, article 8 of the Law of 08.07.2010 N 2464-VI).
At the same time, military levy (ML) is withheld in Ukraine at the rate of 1.5%.
The following describes the features of taxation of personal income tax on wages, depending on the tax status of an individual. A brief note on the criteria for a tax resident of Ukraine is also provided.
Criteria for a tax resident of Ukraine
As a general rule, individuals who have a place of residence in Ukraine are recognized as tax residents (Article 14 of the Tax Code of Ukraine, hereinafter referred to as the TCU).
If there is also a place of residence in another country, a person is recognized as a tax resident of Ukraine if his place of permanent residence is in Ukraine.
If a person also has a place of permanent residence in another country, then he is recognized as a tax resident of Ukraine if the center of his vital interests is in Ukraine. At the same time, the place of permanent residence of his family members or the place of his registration as a business entity or self-employed person (with the exception of registration as an e-resident) is recognized as the center of vital interests.
If it is impossible to determine the state in which a person has a center of vital interests, or a person does not have a place of permanent residence, then a person is recognized as a tax resident of Ukraine if he spends at least 183 days in this country during a calendar year.
If the above criteria do not allow determining the tax status, then a person is recognized as a tax resident if he has the citizenship of Ukraine (including if he has citizenship of another country).
If there is also a place of residence in another country, a person is recognized as a tax resident of Ukraine if his place of permanent residence is in Ukraine.
If a person also has a place of permanent residence in another country, then he is recognized as a tax resident of Ukraine if the center of his vital interests is in Ukraine. At the same time, the place of permanent residence of his family members or the place of his registration as a business entity or self-employed person (with the exception of registration as an e-resident) is recognized as the center of vital interests.
If it is impossible to determine the state in which a person has a center of vital interests, or a person does not have a place of permanent residence, then a person is recognized as a tax resident of Ukraine if he spends at least 183 days in this country during a calendar year.
If the above criteria do not allow determining the tax status, then a person is recognized as a tax resident if he has the citizenship of Ukraine (including if he has citizenship of another country).
So, taking into account your actual tax status (the status of your employee), click on the appropriate button below to get detailed information on the procedure for paying personal income tax by a tax agent or employee, including when changing tax status (resident / non-resident) during the year.
You can also see the visual taxation scheme at the bottom of the page.
Taxation of remuneration of a tax resident of Ukraine
Income under an employment contract of a tax resident of Ukraine is taxed in the performance of labor duties both in Ukraine and outside Ukraine.
If you perform work duties while outside of Ukraine, then your income will be taxed in Ukraine only if you are recognized as a tax resident of Ukraine.
In addition to the social benefits mentioned above, for tax residents of Ukraine, upon their application, it is possible to apply tax rebates (deductions) for actually incurred expenses, including (Article 166.3 TCU):
As a general rule, if there is only income from labor activity for a Ukrainian employer, if there is no tax rebate, then filing a tax return is not required. Otherwise, tax residents must submit a tax return by May 1 and pay personal income tax by August 1 of the following year.
The declaration can be submitted through the electronic service.
If you perform work duties while outside of Ukraine, then your income will be taxed in Ukraine only if you are recognized as a tax resident of Ukraine.
In addition to the social benefits mentioned above, for tax residents of Ukraine, upon their application, it is possible to apply tax rebates (deductions) for actually incurred expenses, including (Article 166.3 TCU):
- on interest paid on a mortgage loan for the purchase (construction) of housing, which is the main place of residence. If the housing area exceeds 100 m2, then a special coefficient is applied that reduces the amount of deductible expenses (Article 175 TC U);
- to pay for their education or the education of a family member in a Ukrainian educational institution;
- to pay for your own treatment or the treatment of a family member, including for the purchase of medicines;
- for the payment of insurance payments for life insurance, pension contributions, as well as contributions to a bank pension deposit;
- for the conversion of vehicles to run on environmentally friendly fuels (including biofuels);
- for the purchase of affordable housing under the state program, including the repayment of a preferential mortgage loan and interest on such a loan.
As a general rule, if there is only income from labor activity for a Ukrainian employer, if there is no tax rebate, then filing a tax return is not required. Otherwise, tax residents must submit a tax return by May 1 and pay personal income tax by August 1 of the following year.
The declaration can be submitted through the electronic service.
If the tax was paid abroad
Taxation of labor remuneration of a tax non-resident of Ukraine
Income under an employment contract of a tax non-resident of Ukraine is taxed when carrying out labor activities on the territory of Ukraine (clause 14.1.54 of the TCU).
That is, if you, working for a Ukrainian company, perform labor duties remotely outside of Ukraine, then your income will be taxed in Ukraine only if you are a tax resident of Ukraine.
As noted above, a Ukrainian employer, including a separate subdivision of a foreign organization, calculates and withholds personal income tax as a tax agent. The personal income tax rate is the same for non-residents and residents - 18%.
For a tax non-resident of Ukraine working under an employment contract in Ukraine, the same social benefits are available as for a resident of Ukraine (see above).
At the same time, non-residents cannot apply for tax rebates (Clause 166.4.1 of TCU).
Individuals - tax non-residents who receive income from work in Ukraine for a Ukrainian employer, as a general rule, do not have to submit a tax return (Article 179 of TC U).
That is, if you, working for a Ukrainian company, perform labor duties remotely outside of Ukraine, then your income will be taxed in Ukraine only if you are a tax resident of Ukraine.
As noted above, a Ukrainian employer, including a separate subdivision of a foreign organization, calculates and withholds personal income tax as a tax agent. The personal income tax rate is the same for non-residents and residents - 18%.
For a tax non-resident of Ukraine working under an employment contract in Ukraine, the same social benefits are available as for a resident of Ukraine (see above).
At the same time, non-residents cannot apply for tax rebates (Clause 166.4.1 of TCU).
Individuals - tax non-residents who receive income from work in Ukraine for a Ukrainian employer, as a general rule, do not have to submit a tax return (Article 179 of TC U).
Algorithm for paying personal income tax on income from an employer in Ukraine
* regardless of the tax status of the employee (resident or non-resident)
**check tax liabilities in the country of tax residence
If tax status has changed during the year
Since tax residence is determined by the place of residence of an individual, the tax status may change during the year. At the same time, since the tax rate and the procedure for paying tax by a tax agent do not depend on the residence of employees, and since the tax period for a tax agent is a calendar quarter, a change in tax residency will affect taxation only if the place of performance of labor duties changes.
Was a resident, became a non-resident
If an employee becomes a non-resident within a year, then his income is subject to income tax in Ukraine only when performing labor functions in Ukraine. Income of a non-resident working outside of Ukraine is not subject to taxation in Ukraine.
Was a non-resident, became a resident
If an employee was a non-resident, but upon a change of residence (or a change in another criterion determining tax status) became a tax resident of Ukraine, then his income will be taxed in Ukraine, regardless of the place of performance of labor functions.
Was a resident, became a non-resident
If an employee becomes a non-resident within a year, then his income is subject to income tax in Ukraine only when performing labor functions in Ukraine. Income of a non-resident working outside of Ukraine is not subject to taxation in Ukraine.
Was a non-resident, became a resident
If an employee was a non-resident, but upon a change of residence (or a change in another criterion determining tax status) became a tax resident of Ukraine, then his income will be taxed in Ukraine, regardless of the place of performance of labor functions.
IMPORTANT
From the salary of employees in Ukraine (both residents and non-residents) no social contribution is withheld - it is paid by the employer at his own expense.
At the same time, a 1.5% military levy is deducted/paid from the salaries of residents and non-residents. The base for accruing VS on the income of employees is similar to the base for personal income tax purposes. However, applicable social benefits are not taken into account for the payment of the ML.
For example, with a salary of UAH 6,700, 18% (personal income tax) and 1.5% (ML) are subject to withholding / payment, the amount "on hand" will be UAH 5,393.5.
When working abroad and / or for a foreign employer, it is possible to withhold social contributions in the respective country. At the same time, their deduction from taxes paid in Ukraine is not provided (exceptions are possible).
From the salary of employees in Ukraine (both residents and non-residents) no social contribution is withheld - it is paid by the employer at his own expense.
At the same time, a 1.5% military levy is deducted/paid from the salaries of residents and non-residents. The base for accruing VS on the income of employees is similar to the base for personal income tax purposes. However, applicable social benefits are not taken into account for the payment of the ML.
For example, with a salary of UAH 6,700, 18% (personal income tax) and 1.5% (ML) are subject to withholding / payment, the amount "on hand" will be UAH 5,393.5.
When working abroad and / or for a foreign employer, it is possible to withhold social contributions in the respective country. At the same time, their deduction from taxes paid in Ukraine is not provided (exceptions are possible).
In 2022, the living wage in Ukraine for able-bodied persons was UAH 2,481 (from 01.01.2022 to 01.07.2022) and UAH 2,600 (from 01.07.2022 to 01.12.2022).
Otherwise, the procedure described above is relevant both for the current tax period and for previous years.
Otherwise, the procedure described above is relevant both for the current tax period and for previous years.
There is a draft law providing for an increase in the rate of military levy to 3%.
Other changes are not expected.
Other changes are not expected.
Using the buttons below, you can check whether the conditions for recognizing you as a tax resident in the country where you actually work remotely are met, and whether you have an obligation to pay tax on your salary in this country. Also find out whether Ukraine has a double taxation treaty (DTT) and its conditions in relation to wages.
Currency control in Ukraine
In Ukraine, there are no currency control restrictions on the opening of foreign accounts by citizens of Ukraine, while there are no requirements to submit reports on foreign accounts.
However, there may be restrictions in your country of citizenship - select the appropriate country here.