Ukraine Introduces Law on Cancellation of Retroactive Increase of Taxes

On December 25, 2024, the law "On Amendments to the Tax Code of Ukraine and other laws of Ukraine on stimulating the development of the digital economy in Ukraine" No. 3939-IX (hereinafter - the Law) was signed by the President and came into force. The Law postpones the payment of new taxes for taxpayers of the unified tax and provides amendments regarding the exemption from liability for violations in respect of controlled foreign companies (CFC).

Military tax (MT)

The law provides for a change in the date of the introduction of the retroactively increased MT for private entrepreneurs and legal entities who are unified taxpayers from October 1, 2024 to January 1, 2025.

Herewith, private entrepreneurs who are unified taxpayers of the 1st and 2nd groups have the right not to pay the MT:

• during one calendar month per year for the time of vacation, as well as for the period of illness that lasts 30 or more calendar days. At the same time, to apply the exemption, such taxpayers must not use hired personnel; and
• for the period from the first day of the month in which hostilities began in the relevant territory, the possibility of hostilities arose, or the temporary occupation of such territory began, until the last day of the month in which such active hostilities ended, the possibility of hostilities ceased or the temporary occupation has ended in case the tax address of such private entrepreneur is located in the respective territories. At the same time, in order to apply the exemption, such taxpayers have a right not to fill out the declaration of a single taxpayer for the relevant period.

Also, self-employed persons (private entrepreneurs and persons who carry out independent professional activities) conscripted for military service during mobilization are exempted from the obligation to accrue, pay and submit reports from the MT.

At the same time, the Law establishes that the annual MT liability  for individuals included in the total annual taxable income for the 2024 reporting year is determined at the MT rate of 1.5%, except for cases of taxation of income from property transactions, income in the form of the value of inherited or gifted property received after December 1, 2024.

CFC

The Law establishes that violations regarding the CFC committed between January 1, 2022, and during the period of martial law from February 24, 2022, to the last calendar day of the calendar month in which martial law will be suspended or canceled:

• penalties provided for by the Tax Code of Ukraine (TCU) are not applied, provided that the controlling person fulfills the duties stipulated by the TCU within six months after the termination or cancellation of martial law; and
• administrative and criminal liability is not applied to the taxpayer and its officials.