MP Shtepa proposes zero rates of tax on bank deposits in Ukraine

Ukrainian parliamentarian from the Servant of the People Party Serhiy Shtepa has proposed that income from individual bank deposits be exempt from tax, which will help reduce interest rates on loans.

Relevant draft law No. 2422 to amend the Tax Code of Ukraine was registered in the Verkhovna Rada, Ukraine's parliament, and published on its website on November 18.

Read alsoDeposits at Ukraine's banks grow by 3.1% in hryvnias, shrink by 0.2% in U.S. dollars in Sept

"The adoption of this [draft] law will facilitate borrowings from individuals in Ukraine's banking system, make loans more affordable, boost households' solvency, as well as contribute to the development of the country's economy in general," the explanatory note to the bill said.

As of today, the basic tax rate on income from bank deposits is set at 18% per annum. In addition, each bank depositor is required to pay 1.5% war tax on any type of income, the document said.

Moreover, the current tax rates on interest accrued on bank deposits lead to the outflow of funds from the banking system and the money is stored at home. In this regard, the zero tax rates on income from bank deposits may indirectly cut interest rates on loans because this will allow banks to lower the rates and bank deposits will cost less.

In particular, Shtepa suggested that a zero tax rate be set for interest on assets on current or deposit bank accounts; deposits in credit unions and interest or discount income on a registered savings (deposit) certificate.

As UNIAN reported earlier, the volume of national currency deposits in Ukrainian banks in 2018 rose by 10%, to UAH 539.7 billion (US$22.4 billion), while that of foreign currency deposits fell by 2.4%, to US$13.4 billion.