Taxes in Ukraine from salary from a foreign employer
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:
- the tax status of the employee (whether an individual - the recipient of income is recognized as a tax resident in Ukraine);
- 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).
Tax residents of Ukraine pay tax on income received from sources both in Ukraine and outside Ukraine. Tax non-residents pay tax only on income from sources in Ukraine.
Remuneration for the performance of labor duties in Ukraine is income from sources from Ukraine (Clause 14.1.54 of TCU). 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.
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 TCU).
At the same time, a foreign organization that has a branch or representative office or other separate subdivision in which there are employees is also recognized as a tax agent (clause 14.1.180 of TCU).
In this case, the duties of a tax agent are performed by such a foreign employer in a manner similar to the one in force for an employer from Ukraine.
If the employer is a foreign organization that is not tax registered in Ukraine, then it is not recognized as a tax agent. In this case, an employee who performs labor duties on the territory of Ukraine (income from a source in Ukraine) and is a tax resident of Ukraine must declare income and pay personal income tax independently.
Procedure for declaring and paying tax
The tax period for personal income tax when paying tax by an individual on his own is a calendar year (clause 179.1 of TCU).
If there is income received from a person who is not a tax agent, employees must submit a tax return by May 1 of the next year (Clause 49.18.4 of the Tax Code) and pay personal income tax by 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 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 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 TCU).
Employees under an employment contract in Ukraine do not pay social tax, 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, in Ukraine military levies (ML) are paid 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:
- the tax status of the employee (whether an individual - the recipient of income is recognized as a tax resident in Ukraine);
- 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).
Tax residents of Ukraine pay tax on income received from sources both in Ukraine and outside Ukraine. Tax non-residents pay tax only on income from sources in Ukraine.
Remuneration for the performance of labor duties in Ukraine is income from sources from Ukraine (Clause 14.1.54 of TCU). 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.
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 TCU).
At the same time, a foreign organization that has a branch or representative office or other separate subdivision in which there are employees is also recognized as a tax agent (clause 14.1.180 of TCU).
In this case, the duties of a tax agent are performed by such a foreign employer in a manner similar to the one in force for an employer from Ukraine.
If the employer is a foreign organization that is not tax registered in Ukraine, then it is not recognized as a tax agent. In this case, an employee who performs labor duties on the territory of Ukraine (income from a source in Ukraine) and is a tax resident of Ukraine must declare income and pay personal income tax independently.
Procedure for declaring and paying tax
The tax period for personal income tax when paying tax by an individual on his own is a calendar year (clause 179.1 of TCU).
If there is income received from a person who is not a tax agent, employees must submit a tax return by May 1 of the next year (Clause 49.18.4 of the Tax Code) and pay personal income tax by 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 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 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 TCU).
Employees under an employment contract in Ukraine do not pay social tax, 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, in Ukraine military levies (ML) are paid 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, 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 of TCU):
As noted above, since a foreign employer is not a tax agent, employees must submit a tax return by May 1 and pay personal income tax by August 1 of the next 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 of 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 of TCU);
- 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 noted above, since a foreign employer is not a tax agent, employees must submit a tax return by May 1 and pay personal income tax by August 1 of the next year.
The declaration can be submitted through the electronic service.
If the tax was paid abroad
If you work abroad, you may be liable to pay tax in the relevant foreign country. At the same time, a tax resident of Ukraine, when submitting a tax return, has the right to reduce the Ukrainian personal income tax by the amount of tax paid in the country with which an agreement on the avoidance of double taxation is concluded (clause 13.4 of TCU).
To apply such a deduction, you will need a certificate issued by a foreign tax authority on the amount of tax paid, as well as on the base and / or object of taxation. In addition, such a certificate is subject to legalization by the relevant foreign diplomatic department of Ukraine. It is necessary to affix an apostille, translate into Ukrainian, as well as notarize the signatures of the translator. A certificate from a foreign employer (tax agent) will not be suitable for these purposes (clause 13.5 of TCU).
If at the time of filing the declaration there is no specified confirmation of tax payment abroad, then an application can be submitted to postpone the deadline for submitting a tax return, but no more than until December 31 of the year following the reporting one (clause 170.11.2 of TCU).
Moreover, if the tax paid abroad exceeds the income tax liability in Ukraine, then the difference is not returned to the taxpayer (clause 170.11.4 of TCU). It is also not possible to offset foreign tax against the payment of a military tax.
It is IMPORTANT to note that if you also have foreign citizenship, the specified tax offset is not possible (Clause 14.1.213 of TCU).
It is necessary to take into account the provisions of double tax treaties (DTT) concluded by Ukraine.
To apply such a deduction, you will need a certificate issued by a foreign tax authority on the amount of tax paid, as well as on the base and / or object of taxation. In addition, such a certificate is subject to legalization by the relevant foreign diplomatic department of Ukraine. It is necessary to affix an apostille, translate into Ukrainian, as well as notarize the signatures of the translator. A certificate from a foreign employer (tax agent) will not be suitable for these purposes (clause 13.5 of TCU).
If at the time of filing the declaration there is no specified confirmation of tax payment abroad, then an application can be submitted to postpone the deadline for submitting a tax return, but no more than until December 31 of the year following the reporting one (clause 170.11.2 of TCU).
Moreover, if the tax paid abroad exceeds the income tax liability in Ukraine, then the difference is not returned to the taxpayer (clause 170.11.4 of TCU). It is also not possible to offset foreign tax against the payment of a military tax.
It is IMPORTANT to note that if you also have foreign citizenship, the specified tax offset is not possible (Clause 14.1.213 of TCU).
It is necessary to take into account the provisions of double tax treaties (DTT) concluded by Ukraine.
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 TCU).
That is, if you, working for a foreign company, perform labor duties on the territory of Ukraine, then your income will be taxed in Ukraine only if you are a tax resident of Ukraine.
As noted above, 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).
The deadlines for filing a declaration and paying tax at the end of the year for residents and non-residents do not differ.
In the case of employment outside Ukraine (the source of income is not in Ukraine) for a foreign employer, tax non-residents do not pay personal income tax on the income received from such activities.
That is, if you, working for a foreign company, perform labor duties on the territory of Ukraine, then your income will be taxed in Ukraine only if you are a tax resident of Ukraine.
As noted above, 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).
The deadlines for filing a declaration and paying tax at the end of the year for residents and non-residents do not differ.
In the case of employment outside Ukraine (the source of income is not in Ukraine) for a foreign employer, tax non-residents do not pay personal income tax on the income received from such activities.
Algorithm for paying personal income tax on income from a foreign employer
* regardless of the tax status of the employee (resident or non-resident)
**check tax liabilities in the country where you work
If tax status has changed during the year
Since the tax period for self-paying tax by an employee is a year, if the criterion of tax residency is met in the corresponding year, as a rule, the tax status does not change during the year.
For example, if at the beginning of the year income was received from a source outside of Ukraine and at the time of receipt of income the person did not have a place of residence in Ukraine, but at the end of the year the conditions for recognizing the person as a tax resident of Ukraine were met, then such income may be taxed in Ukraine.
Was a resident, became a non-resident
If an employee of a foreign employer is recognized as a non-resident within a year, then his income is subject to personal income tax in Ukraine only when performing labor functions on the territory of Ukraine. Income of a non-resident when working outside of Ukraine for a foreign employer is not subject to taxation in Ukraine.
If the taxpayer leaves the territory of Ukraine in connection with a permanent place of residence in another country, then he must submit a declaration no later than 60 calendar days preceding the departure (clause 179.3, article 179 of TCU).
Was a non-resident, became a resident
If a person was a non-resident, but became a tax resident of Ukraine, then his income will be taxed in Ukraine, regardless of the place of performance of labor functions.
For example, if at the beginning of the year income was received from a source outside of Ukraine and at the time of receipt of income the person did not have a place of residence in Ukraine, but at the end of the year the conditions for recognizing the person as a tax resident of Ukraine were met, then such income may be taxed in Ukraine.
Was a resident, became a non-resident
If an employee of a foreign employer is recognized as a non-resident within a year, then his income is subject to personal income tax in Ukraine only when performing labor functions on the territory of Ukraine. Income of a non-resident when working outside of Ukraine for a foreign employer is not subject to taxation in Ukraine.
If the taxpayer leaves the territory of Ukraine in connection with a permanent place of residence in another country, then he must submit a declaration no later than 60 calendar days preceding the departure (clause 179.3, article 179 of TCU).
Was a non-resident, became a resident
If a person was a non-resident, but 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.
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.