At the end of 2024, entrepreneurs were expected to face a new challenge in Ukraine—raising tax rates. According to data from the Opendatabot monitoring service, on the day the law was adopted, more than 2,300 individual entrepreneurs stopped working, and 22,521 others stopped working soon enough. What changed and what tax rates increase for individual entrepreneurs is predicted for 2024-2025, you will get to know in the article.
Draft law on tax rates increase
In August 2024, the government offered a draft law №11416-d on tax rates increase which aimed to involve additional funds to the budget of Ukraine for the development of the infrastructure, defending needs, and support of social programs. Also, this initiative is designed to decrease the budget deficit and bring the Ukrainian tax system into line with EU standards.
After review, the document had to enter into force on October 1 but entered into force 2 months later. Thus, on November 28, 2024, the President signed the Law on tax raising under the name “About making adjustments to the Tax code and other laws of Ukraine according to balancing budget receipts during the state of war” (№ 4015-ІХ). It entered into force on December 1, 2024, and some points will enter into force on January 2025.
How will it impact simplified-system tax entrepreneurs?
Signing new laws that change the Tax code always raises new questions among entrepreneurs.
Simplified-system tax entrepreneurs are the base of the small businesses in Ukraine which depend on unpredictable rules and stability of the tax legislation the most.
For simplified-system tax entrepreneurs, changes will be the next:
For the 1st, 2nd, and 4th groups—paying a military levy of 10 percent of the minimum salary.
For the 3rd group—paying a military levy of 1 percent of the income.
As a result, this tax increase will cause for individual entrepreneurs:
financial load increase, especially for small entrepreneurs;
a possible switch of the part of individual entrepreneurs to other forms or even business closure;
increase of necessity of cost optimization and search for new sales markets.
The term of tax-paying will also change:
- For the 1st, 2nd, and 4th groups—advance payments are paid every month not later 20th date of the current month. Thus, for January 2025, the payment needs to be paid up to January 20, 2025.
- For the 3rd group—the tax payment is paid 10 days after the deadline for submitting the tax declaration for the fiscal quarter.
What will change for general-system tax entrepreneurs?
With the adoption of new updates according to Law № 4015-ІХ, the category of entrepreneurs who work on the general system will also feel an additional financial load. For them, the payment of the military levy changes to 5 percent.
Regarding this, the business will face to:
the necessity of more thorough tax planning;
rasing demand for counters and tax consultants’ services;
probability of the investments сut due to cost increase.
Submission of reports
From January 1, 2025, changes in tax reporting for individual entrepreneurs also enter into force in Ukraine. The main innovations relate to the submission of joint reporting from the Personal Income Tax and Single Social Contribution.
Previously, individual entrepreneurs submitted combined reports on the personal income tax (PIT) and the single social contribution (USC) every quarter. From 2025, this reporting must be submitted monthly. For example, the first monthly report for January 2025 must be submitted by February 20, 2025.
There will also be changes in reporting forms. The updated reporting forms from the single tax will include information on the payment of the military levy. These forms will be available in the electronic account of a payer.
Late submission or non-submission of monthly reports may result in fines and administrative liability. Therefore, it’s important to comply with the new deadlines and reporting forms to avoid possible fines.
What will change for Diya.City residents?
A special Diya.City regime for the IT industry was introduced shortly before the war. It was supposed to become an incentive for Ukaraine’s digital economy development, ensuring the unchanged tax conditions for residents for 25 years.
However, due to martial law, these guarantees had to be adapted. In particular, for Diya.City residents, the new law provides for the following changes:
For Diya.City resident startups, the rule that made it impossible to apply a preferential personal income tax rate (PIT) of 5% and the minimum single social contribution (MSC) for gig specialists, if the number of such employees in the company is less than 9 people. If a startup doesn’t meet the criteria established for residents of Diya.City within two years, the underpaid personal income tax and social security will have to be compensated.
The law exempts charitable assistance provided by Diya.City residents to the Armed Forces of Ukraine from tax on withdrawn capital.<
The requirement to draw up acts of rendered services for gig specialists has been canceled, which simplifies the document flow.
What will change in the gambling industry?
The gambling industry will also experience an increase in taxes in Ukraine. Gambling is an area of online gambling that includes slots, card games, roulette, crash games, sports, and eSports betting, as well as other entertainment formats. Simply put, gambling is a general term for the entire gambling industry.
For gambling operators, the military levy will increase to 5%.
Tax raising in 2024-2025 can be a powerful incentive for businesses to review their approaches to doing business. Forced search for innovative solutions and optimization of business processes can increase the efficiency of companies, stimulate the introduction of modern technologies, and develop new directions.
As a result, these changes can help businesses adapt to new realities and also contribute to the renewal of the economy.
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