If you want to do business in Ukraine, you have to pay taxes arising from the employment of staff and the performance of your business.
Accounting for companies in Ukraine
Accountancy in Ukraine involves an accountancy company or a full-time accountant managing the cash budget, preparing accounts and reporting to the state authorities, handling the workflow with lawyers, and assessing taxes against budgets. The accountant always knows when, to whom, and how much tax one has to pay.
Businesses in Ukraine pay income tax annually. The base for the assessment of taxes is the accrued net earnings for the past calendar year.
The tax on profit for LLCs is 18%.
The proviso is that you must document every expense transaction.
Taxation of salaries in Ukraine
In Ukraine, the taxation system for different forms of staff employment (an employee and a contractor or SP) is different. You can learn more about working with Ukrainian employees in the article Standard Terms of Cooperation with Employees in Ukraine.
Payment of taxes for employees
Each month, an employee receives a salary from the employer, which is an expense for the employer and income for the employee.
In Ukraine, the employer deducts and pays over the taxes on the income of the employee. Before you pay the salary to your employee, you deduct:
- Income tax—18%
- Military fee—1.5%
After the salary is paid, you must pay an additional employer tax, which is a unified social tax, in the amount of $35.
When dealing with hired staff in the Ukrainian IT industry, the net amount of salary is negotiated, which already includes the tax deduction.
Payment of taxes for a contractor (SP)
The contractor’s (SP’s) salary is his/her income. The tax rate in this case is 5% of income. In addition, the contractor (SP) pays the UST in the amount of about $35.
In the Ukrainian IT industry, the company often assumes the payment of taxes for the employee, so it pays a higher salary than agreed, taking into account the 5% tax.
Such workflow is common in Ukraine among IT companies.