The law on increased taxes and military fees has been signed: what can Ukrainians expect?

Zelensky Signed Law on Tax Increases in Ukraine

The President of Ukraine, Volodymyr Zelensky, on November 28 signed a law passed by the Verkhovna Rada regarding tax and military levy increases. The main aspect of the law is the rise of the military levy on all incomes of Ukrainians from 1.5% to 5% this year and in 2025.

This law will take effect on December 1. As previously explained by experts, this initiative is one of the key requirements from creditors and is crucial for funding all defense-related expenditures.

It is anticipated that in 2025, due to the tax increases, the annual budget revenues will rise by 141 billion hryvnias. The hike in the military levy from 1.5% to 5% will generate 107.7 billion hryvnias; establishing a military levy for taxpayers under the simplified taxation system, specifically for individual entrepreneurs of groups I, II, III, and IV – will yield 13.7 billion hryvnias, while contributions from individual entrepreneurs of group III will bring in 929 million hryvnias.

Thus, if currently, the taxation of citizens' incomes stands at 19.5% (18% personal income tax plus 1.5% military levy), from December 1, it will increase to 23%. This amount will also be deducted by banks from the income earned on deposited funds.

Military Levy in Ukraine to Increase to 5%

The law on the record increase of taxes in Ukraine will come into effect on December 1. Among other things, it involves an increase in the military levy, but at the same time, there will be no separate taxes applied retroactively.

"A sleepless night is the result — the resource law will take effect on December 1, 2024. It will be published accordingly on November 30. Common sense has prevailed. We will consider this a printer's error," — wrote the head of the Rada's financial committee, Danil Getmantsev.

President Volodymyr Zelensky signed this law on November 28. It was immediately published by "Golos Ukraine," suggesting it would come into effect on November 29. This means that for two days of the current month (November 29-30), increased taxes would have to be paid, including those on salaries.

As noted by member of the financial committee of the Verkhovna Rada, Yaroslav Zheleznyak, this added workload for accountants who needed to calculate payments for those two days. However, the situation was eventually resolved.

Military Levy on Salaries: What Changes

From the moment the law takes effect in December, the military levy on personal income will increase from 1.5% to 5%. This applies to all types of income, including salaries. Consequently, employers will withhold more from their employees' official salaries. Meanwhile, the personal income tax (PIT) rate remains unchanged at 18%, as does the unified social contribution (USC), which is 22%.

Thus, employers will pay not 19.5%, but 23% from salaries (PIT plus military levy). This means that for every thousand hryvnias earned, employers will have to pay 230 hryvnias instead of 195. The increased military levy rate will also apply to interest income of individuals from deposits.

However, for military personnel, the military levy rate remains at 1.5%. It is important to note that the 1.5% rate applies to income accrued before the new rules take effect. For example, an advance paid in the first half of October will be subject to the old rate.

Military Levy on Income of Individual Entrepreneurs

For individual entrepreneurs of groups I, II, and IV of the unified tax, a military levy will be introduced, amounting to 10% of the minimum wage (as of the first day of the month). Currently, the minimum wage is 8000 hryvnias, so these categories of entrepreneurs are required to pay 800 hryvnias per month.

For group III entrepreneurs under the simplified taxation system, a military levy of 1% on income will be established based on the results of the first quarter of 2025. For individual entrepreneurs (IE) of the first, second, and fourth groups of taxpayers under the unified tax, the obligation to pay the military levy will commence on January 1, 2025.

Innovations in Tax Reporting

Starting January 1, 2025, monthly reporting will be introduced for the unified social contribution, personal income tax, and military levy for all tax agents. Quarterly reporting will remain in effect until the end of this year.

Exemptions will be extended, allowing those receiving charitable assistance (including from abroad) not to submit a tax declaration regarding their property status and income. This provision applies to internally displaced persons and Ukrainian refugees abroad receiving benefits.

For individual entrepreneurs, reporting on military levy payments will also be introduced.

From December 1, Ukrainians will be able to receive 1000 hryvnias on the "National Cashback" card, which can be activated through "Diia."