Changes in the payment of personal income tax and unified social tax by Diia City residents
TheLaw of Ukraine dated December 4, 2024 No. 4113-IX "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Stimulating the Development of the Digital Economy in Ukraine" (hereinafter referred to as Law No. 4113) shall enter into force on January 1, 2025, except for certain provisions regarding the clarification of the military fee payment procedure, which shall enter into force on the day following the date of publication of Law No. 4113 and apply to periods from the date of entry into force of Law of Ukraine No. 4015-IX dated October 10, 2024 "On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Ensuring the Balance of Budget Revenues during the Period of Martial Law" (hereinafter - Law No. 4015), i.e. from December 1, 2024.
The novelties of Law No. 4113 include:
♦ clarifies the provisions of the Tax Code of Ukraine regarding the application of the relevant personal income tax rate and the single contribution to the obligatory state social insurance (hereinafter - the single contribution) by residents of Diia City when paying income to taxpayers - specialists of Diia City residents
♦ clarified the provisions of the Code on the procedure for payment of personal income tax on the income of taxpayers - specialists of Diia City residents for the relevant calendar months in which the resident of Diia City did not meet the relevant requirements of the relevant legislation;
♦ the procedure for payment of personal income tax and single contribution from the income of taxpayers - specialists of a Diia City resident who was registered as a startup was determined.
Changes in the payment of personal income tax and single contribution by residents of Diia City
1. Pursuant to subparagraph 170.141.2 of the Tax Code, the income of a taxpayer - a specialist resident of Diia City, which is paid in his favor by a resident of Diia City in the form of
a) salary;
b) remuneration under a gig-contract concluded in accordance with the procedure provided for by the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", including remuneration for the creation and transfer of rights to works created to order;
c) royalties for the creation of a work for hire and transfer of rights to works for hire.
The amendments introduced by Law No. 4113 clarified the provisions of the Code and clearly defined that the personal income tax rate of 5 percent shall be applied to the said income starting from the calendar month following the calendar month in which the status of a resident of Diia City was acquired.
The income of specialists of a resident of Diia City, which was accrued (paid) in the calendar month in which the status of a resident of Diia City was acquired, is taxed at the rate of 18 percent.
2. Amendments to subparagraph 170.141.5 of the Tax Code clarify the procedure for payment of personal income tax on the income of taxpayers - specialists of the Diia City resident for the relevant calendar months in which the Diia City resident did not meet the relevant requirements of the relevant legislation.
In order for a Diia City resident to apply the personal income tax rate of 5 percent to the income of taxpayers - specialists of a Diia City resident. the resident must meet the requirements set forth in paragraphs 2 and 3 of part one of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" in the respective month, namely: the average monthly remuneration of the engaged employees and gig workers must be at least the equivalent of EUR 1,200, and the average number of employees and gig workers must be at least 9 people.
With the amendments introduced by Law No. 4113, it is established that if a tax agent - a resident of Diia City in the relevant calendar month did not meet the above requirements, such tax agent is obliged to independently calculate the amount of income accrued (paid) in favor of individual taxpayers and the amount of tax withheld from them, as well as the amount of accrued unified social tax at the rate of 18 percent. with respect to the income of the Diia City resident specialists accrued (paid) during such calendar month, and pay (transfer) personal income tax to the budget at its own expense before submitting the tax calculation, minus the tax paid (transferred) to the budget on such income.
3. Pursuant to part three of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", a legal entity that does not meet all the requirements for a Diia City resident is entitled to hold the said status, but not longer than until December 31 of the calendar year following the calendar year in which it acquired the status of a Diia City resident, subject to the requirements established by part three of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine".
Law No. 4113 supplemented paragraph 170.141 of the TCU with a new subparagraph, which sets out the procedure for applying the relevant personal income tax rate by such legal entities.
Thus, it is established that until December 31 of the calendar year following the calendar year in which the tax agent acquires the status of a Diia City resident, the personal income tax rate of 5 percent shall be applied to the income paid to the specialists of the Diia City resident and in the calendar month in which they did not meet the requirement set forth in paragraph 3 of part one of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" (the average number of employees and gig specialists may be less than 9 people).
If, after December 31 of the calendar year following the calendar year in which they acquired the status of a Diia City resident, such a tax agent - Diia City resident continues to fail to meet the requirement specified in paragraph 3 of part one of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", such a tax agent - Diia City resident is obliged to independently calculate and pay (transfer) to the budget at its own expense the personal income tax within the period specified for the monthly tax (reporting) period with respect to the income of the Diia City resident's specialists paid during the last three months of the calendar year following the calendar year in which the tax agent acquired the status of Diia City resident, less the tax paid (transferred) to the budget on such income.
In this case, the amount of such tax paid (transferred) by the tax agent shall not be included in the total monthly (annual) taxable income of the specialists of the resident of Diia City.
In accordance with paragraph 2 of Section II "Final and Transitional Provisions" of Law No. 4113, the provisions of the new second paragraph of subpara.6 of the TCU regarding the need to pay additional personal income tax by a tax agent - a resident of Diia City, which continues to fail to meet the requirement specified in paragraph 3 of part one of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" after December 31 of the relevant calendar year, apply to Diia City residents who acquire the status of a Diia City resident in accordance with part three of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", starting from the first day of the month following
4. Amendments to part141 of Article 8 of the Law of Ukraine "On Collection and Accounting of the Single Contribution for Obligatory State Social Insurance" (hereinafter - Law No. 2464) clarified the procedure for applying the relevant single contribution rate by new Diia City residents.
As of today, the single contribution for a taxpayer resident of Diia City, who in a calendar month met the requirements set forth in paragraphs 2, 3 of part one, paragraph 10 of part two of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" (the amount of the average monthly remuneration of engaged employees and gig specialists must be at least the equivalent of EUR 1200, the average number of employees and gig specialists must be at least 9 people, the total amount of tax debt within 30 days does not exceed 10 minimum wages (based on the minimum wage established as of January 1 of the current calendar year)) is established:
1) on the amount of wages accrued to each insured person by type of payment, including basic and additional wages, other incentive and compensation payments, including in-kind payments, determined in accordance with the Law of Ukraine "On Remuneration of Labor" - in the amount of the minimum insurance premium;
2) for the amount of remuneration to individuals for the performance of work (provision of services) under gig contracts concluded in accordance with the procedure provided for by the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" - in the amount of the minimum insurance premium.
Amendments introduced by Law No. 4113 clarified the provisions of Law No. 2464 and clearly defined that a single contribution in the amount of the minimum insurance premium from the said income shall be paid by a resident of the Diia City starting from the calendar month following the calendar month in which the payer acquired the status of a Diia City resident.
5. In accordance with part three of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", a legal entity that does not meet all the requirements for a Diia City resident is entitled to be in the said status, but not longer than until December 31 of the calendar year following the calendar year in which it acquired the status of a Diia City resident, subject to the requirements established by part three of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine".
Law No. 4113 supplemented part141 of Article 8 of Law No. 2464 with new provisions that set out the procedure for applying the relevant single contribution rate by such legal entities.
Thus, it is established that such legal entities shall pay a single contribution in the amount of the minimum insurance premium until December 31 of the calendar year following the calendar year in which they acquired the status of a Diia City resident and in the calendar month in which they did not meet the requirement set forth in paragraph 3 of part one of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" (the average number of employees and gig specialists may be less than 9 people).
If, after the expiration of the specified period, such a Diia City resident taxpayer continues to fail to meet the requirement specified in paragraph 3 of part one of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", such a Diia City resident taxpayer is obliged to independently accrue and pay a single contribution at the rate of 22 percent within one month (8.41 percent for an employee with a disability for an employee with a disability) with respect to income paid during each reporting period when the payer did not meet the above requirement within the last three months of the calendar year following the calendar year in which the payer acquired the status of a Diia City resident, less the single contribution paid in the amount of the minimum insurance premium for such reporting periods.
Such additional amounts are not subject to a penalty of 10 percent of the additional amount established by paragraph 3 of part eleven of Article 25 of Law No. 2464.
In accordance with paragraph 2 of Section II "Final and Transitional Provisions" of Law No. 4113, the provisions of part141 of Article 8 of Law No. 2464 regarding the need to pay a single contribution shall apply to residents of the Diia City who acquire the status of a Diia City resident in accordance with part three of Article 5 of the Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine", starting from the first day of the month following the month when Law No. 4113 enters into force, i.e. from February 1, 2025.