What is the payroll tax in Ukraine

While Ukraine is considered a developing country with lower taxes compared to some European Union countries or the UK, it is essential to note that Ukraine’s total payroll tax rate is still relatively high. It is crucial for businesses operating in Ukraine to understand the tax laws and regulations to remain compliant and avoid potential penalties. This can be a challenging task for foreign firms that are not familiar with the Ukrainian tax system, so it is highly recommended to seek the guidance of a professional tax advisor who is well-versed in the local laws and regulations.

Despite the high payroll tax rate, Ukraine offers many advantages for businesses looking to invest there, including a skilled and highly educated workforce, a strategic location, and a favorable business climate. By understanding the tax landscape in Ukraine and working with trusted advisors, businesses can successfully navigate the tax system and take advantage of the country’s many opportunities.

What are the payroll taxes in Ukraine?

In Ukraine, as in many other countries, the bookkeeper manages all payroll processing and taxation. If you own a company in Ukraine, make sure to have a good Ukrainian accountant, as the fine for violating payroll legislation in Ukraine is high.

When the employer is going to pay the salary to the employee in Ukraine, three taxes shall be transferred to the budget by the executive of the Ukrainian company:

18% – individual profit tax;
5 % – military tax;
22% – social security tax;

All three taxes shall be transferred by the company (the employer) before, not later than, the moment when the salary is paid. It is also possible the salary. Moreover, the bank is obliged to control this requirement. Even the statement itself shall contain the information that the taxes were paid in full. Unlike other countries, social security tax is the duty that the employer shall additionally pay. So, the company shall increase the expenses per employee by 22%. Consider it when calculating your financial structure and costs in Ukraine. Meanwhile, the amount that is to be transferred to the employee shall be reduced by the amount of military tax and individual profit tax (23%) that are considered deductions from an employee’s wages. So, the employer is regarded as the tax agent, under Ukrainian law, and has an obligation to withhold and transfer certain taxes to the budget of Ukraine.

Of course, the salary shall be paid based on the employment contract. The minimum wage in Ukraine is UAH 8000.00 per month as of January 2025. It means you can not officially hire an employee in Ukraine and pay less than the mentioned amount. There is also the requirement to pay the salary 2 times a month. Between the 15th and 20th day of each month, it is necessary to pay the advanced payment of the wages for the current month, and between the 01-st and 07-th of the next month, it is essential to pay the remaining salary. As we have informed you before, when conducting the payroll transfer in Ukraine, the company has to pay all three taxes at once.

What statements on payroll shall be submitted by the employer in Ukraine?

The Ukrainian company must submit the salary statements every month by the 19th day of the following month. The statement shall include the name, surname, tax id number of the employee, and the amount of salary and taxes that the company had paid. The company director shall sign the statements and (if there are any) by the official accountant. Consider that the data in the payroll declarations shall fully match with the amount of actually paid salary. The Ukrainian employer shall submit the following declarations on the paid wages:

war tax declaration;
social security tax declaration;
tax on personal income.

Also, consider that if you are an employee, it is not necessary to submit any declaration to the tax authorities if you have not received any other income except your salary. The statements shall be submitted timely. Otherwise, there is a fine.

It is worth mentioning that, in addition to the payroll tax, businesses in Ukraine are also subject to other taxes and fees, such as corporate income tax, value-added tax (VAT), and property tax. Therefore, while some taxes may be low or non-existent in Ukraine, businesses should still be prepared to navigate a complex tax system.

Are there any special payroll tax rates in Ukraine?

Companies that have obtained the status of Diia.City in Ukraine can use special payroll tax rates. Such companies withhold 5% individual income salary tax instead of 18% for most other businesses. There is also a reduced social security tax which is calculated based on the minimum wage established by the Ukrainian Government but not based on the actual salary. This special salary tax regime can only apply to businesses that have been processed through Diia City residency registration in Ukraine.