Tax Facts An Independent member of Baker Tilly International

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1 Tax Facts 2017 Baker Tilly Ukraine 28 Fizkultury Street Kyiv, T: (44) F: (44) info@bakertilly.ua An Independent member of Baker Tilly International

2 Personal Income Tax (PIT) PIT is charged in Ukraine in connection with income obtained on the worldwide basis. Residents are liable to pay tax from income received from both Ukrainian and foreign sources. Non-residents pay PIT from their income obtained within the territory of Ukraine PIT rate 18% Taxation of income from particular sources Business profits 18%; Dividends 5/18%. The lower rate applies to dividends received from companies residents of Ukraine that are payers of the corporate profit tax; Interest 18%. Millitary contribution The rate is 1.5% of personal income from employment, provisioning of services under civil contracts and lottery prizes. The payers of the military contribution are: Residents who receive Ukrainian sourced income and foreign income; Non-residents who receive Ukrainian sourced income; and Tax agents. The military contribution is levied and paid in accordance with the rules that apply to personal income tax.

3 Unified Social Security Contribution The mandatory social insurance payment is presented in Ukraine by the Unified Social Security Contribution (USSC). USSC has been charged on the amount of wages, salaries and other payments to employees, income of self-employed individuals and profits of individual entrepreneurs. Salaries paid by foreign employers are not subject to USSC USSC rate..22% USSC amounts are deductible for CIT purposes. The SSC is charged on the payments not exceeding the ceiling which is set at the level of 25 subsistence minimums per month. Value Added Tax (VAT) Registration of Tax Payers Legal entities as well as individual entrepreneurs who carried out any transactions subject to VAT within previous 12 month exceeding UAH 1 M must register as VAT payers. The Tax Code grants a right to an entity to get registered on voluntarily basis by filing an application to the tax office. VAT Rates VAT rates are: 20%, 7%, and 0%. The standard VAT rate is 20% and applies to almost all supplies subject to VAT (except the specific transaction subject to 7% and 0% VAT).

4 The reduced rate of 7% applies to supply and import of registered medicines and specific medical goods, as well as medicines, medical goods, and medical equipment allowed to be used in clinical trials. Export of goods and some other limited transactions are taxable at a zero rate. Single Tax (ST) ST is designated to reduce tax and administrative burden for small businesses, both legal entities and individuals. Payers of the ST are prohibited to conduct some types of business activities. Group Taxpayers Maximum Rate, % annual revenue, 000 UAH I Individuals (1) II Individuals 1, (2) III Individuals/ 5,000 3/5 (3) Legal entities IV Only agricultural producers with the share of agricultural production for the previous fiscal year that exceeds 75 % may enjoy favorable tax treatment. The fourth ST group provides relatively small tax burden due to its rates which are set up in per cent of the normative value of one hectare of land plots as follows (per annum): a. For plowed fields, hayfields and pasture fields 0.95 (for mentioned kinds of land owned by entities specialized in growing plants in hothouses 6.33) b. For perennial plantations 0.57 c. For lands of water fund 2.43 In case the land is located in mountain areas and Polissya territories (north of Ukraine), the rates are lowered still further: a. For plowed fields, hayfields and pasture fields 0.57 b. For perennial plantations (1) Minimum subsistence level set up as of January 1 of the reporting year (2) Of minimum monthly salary set up as of January 1 of the reporting year (3) The lower rate applies if VAT is been paid in accordance to the general rules

5 Corporate Income Tax (CIT) Ukrainian companies are liable for corporate income tax on worldwide income. Non-resident companies are taxable only on income and gains arising in Ukraine CIT rate 18% Taxable profit Taxable profit is calculated on a quarterly basis. Tax year Although a corporate income tax year is fixed by reference to a calendar year. Deductible costs Ukrainian legislation envisages only several types of limitation (reserves, depreciation, financial, other). There is no limitation for costs that is not connected to business activities, such expenses are fully deductible. Losses may be carried forward. No carry backwards is available. Depreciation Tax depreciation rules vary by type of assets. Transfer pricing Generally, transactions with non-residents - related parties are subject to specific transfer pricing rules and with residents of the low-tax jurisdictions.

6 Transfer prices should be supported by appropriate transfer pricing report. Transfer pricing documentation shall be provided to tax authorities on request basis. Withholding taxes - payments to foreign entities Dividends 15% Interest 15% Royalties 15% Double Taxation Treaties Ukraine has signed over 70 Avoidance of Double Taxation Treaties. All treaties follow the OECD model. Treaty tax rates (%) with some Ukraine's trading partners Country Dividends Interest Royalties Belgium 5/15 2/ 5 0/5 Cyprus 5/ /5 Czech 5/ Republic France 0/5/15 2/10 0/10/ Germany 5/10 2/5 0/5 Hungary 5/ Italy 5/ Latvia 5/ Lithuania 5/ Netherlands 0/5/15 2/10 0/10 Norway 5/15 0/10 5/10 Poland 5/ Slovakia Slovenia 5/15 5 5/10 Sweden 0/5/10 0/10 0/10 Switzerland 5/15 0/10 0/10 USA 5/