The Ministry of Finance expects the Parliament to adopt tax changes

On September 3, the Verkhovna Rada of Ukraine approved as a basis the amendments to the state budget for 2024 to increase spending on the security and defense sector by UAH 495.3 billion. At the same time, the draft law on amendments to the Tax Code, which is systematically linked to the changes to the state budget, was sent back for a second reading.

Increased spending in the security and defense sector is envisaged for:

• Ministry of Defense - UAH 355.6 billion;
• Ministry of Internal Affairs - UAH 108.1 billion, (including: National Police - UAH 15.2 billion; State Border Guard Service - UAH 41.9 billion; National Guard - UAH 48.2 billion; SES - UAH 2.8 billion);
• State Special Transport Service - UAH 18 billion;
• The Defense Intelligence of Ukraine - UAH 7.5 billion;
• The Security Service of Ukraine - UAH 5.1 billion;
• Foreign Intelligence Service - UAH 0.5 billion;
• State Special Communications Service - UAH 0.3 billion;
• The State Protection Service of Ukraine - UAH 0.1 billion.

The lion's share of the sources to cover the additional expenditures (UAH 462.4 billion or 93%) is provided for by increasing the revenues of the general fund of the state budget within the current rates, reducing the expenditures for the servicing and repayment of the state debt, increasing the plan for the placement of domestic government bonds, and reducing a number of expenditures in the general and special funds of the state budget, namely

1. Increase in the revenues of the general fund of the state budget by UAH 120.8 billion, in particular

• UAH 99.8 billion from the over-fulfillment of the state budget revenues targets for January-August 2024
• additional revenues from fuel excise taxes - UAH 9.8 billion;
• redistribution of PIT revenues from the special fund to the general fund in Q4 - UAH 11.2 billion;

2. Reduction of expenditures on public debt servicing and repayment - UAH 115.4 billion.

3. Increase in the plan for the placement of domestic government bonds by UAH 216 billion.

4. Reducing a number of expenditures in the general and special funds of the state budget by UAH 10.6 billion.

Instead, the draft law on amendments to the Tax Code, which parliamentarians sent for a second first reading, in its current version provides for:

1. Increase in the military tax rate:

• for personal income from 1.5% to 5.0%;
• for individual entrepreneurs - single tax payers: 10% based on one minimum wage per month for individual entrepreneurs of the first, second and fourth groups and 1% of income for single tax payers of the third group;

2. Introduction of monthly advance payments of corporate income tax by taxpayers engaged in retail fuel trade (for each gas station) in the amount of:

• UAH 60 thousand in case of sale of two or more types of fuel;
• UAH 30 thousand in case of sale of liquefied gas only;
• UAH 45 thousand if the share of liquefied gas sales in the total volume of fuel sold during the month is 50% or more;

For places of retail sale of fuel, at the address of which retail sale of alcoholic beverages and/or tobacco products is carried out:

• UAH 80 thousand in case of sale of two or more types of fuel;
• UAH 40 thousand in case of sale of liquefied gas only;
• UAH 60 thousand if the share of liquefied gas sales in the total volume of fuel sold during the month is 50% or more;

3. Establishment of a 25% income tax rate for financial institutions starting in 2025;

4. Changing the tax period for submitting personal income tax reports from quarterly to monthly, which is necessary to monitor the amount of wages for the introduction of the "economic booking" mechanism. The Ministry of Economy and the Ministry of Digital Transformation are currently developing such a mechanism.

We expect the Verkhovna Rada of Ukraine to support the amendments to the Tax Code during the second reading and the amendments to the State Budget-2024 during the second reading as soon as possible.