REUTERS
Ukraine's Cabinet of Ministers has tabled in parliament a compromise bill on amendments to the Tax Code envisaging a flat single social security tax rate at 22% along with the cancelation of a 3.6% single social security tax rate on hired personnel, and lowering the ceiling of annual revenue for single tax payers of the third group to UAH 5 million, or about $217,520 at the current official forex rate.
This is stipulated in an explanatory note to the government-prepared bill on amendments to the Tax Code of Ukraine and certain legislative acts of Ukraine to balance the budget revenues in 2016 (No. 3688).
In particular, the bill provides for an increase in the maximum amount of single social security tax to 25 minimum wages from today's 17.
The bill also proposes a reduction in the annual income for entrepreneurs of the third group of the simplified taxation system from UAH 20 million to UAH 5 million, while increasing tax rates for the group from 2% to 3% (for value added tax payers) and from 4% to 5% (for those who do not pay VAT). The bill also suggests an increase in the flat tax rate by 1.8 times for entrepreneurs of the fourth group of the simplified taxation system and the cancelation in 2016 of the indexation coefficient for pecuniary valuation of land to while determining the taxation base.
The document envisages the introduction of one rate of personal income tax at 18% instead of the current rates of 15% and 20%, and maintaining a 5% rate of tax on dividends.
The Ukrainian government also encourages the Verkhovna Rada to support the introduction of a special transition period of taxation for agricultural producers, envisaging that the latter will transfer 75% of VAT payments to the national budget, while the remaining 25% will be funneled to special accounts for further use to meet their needs. This algorithm is proposed until January 1, 2017.
What is more, the government proposes abolishing as of January 1, 2016, the special regime of VAT taxation for supplies of grain and industrial crops, as the result of which all taxpayers who export grain will have their VAT refunded.
The Ukrainian government also proposed the introduction of VAT on gas transportation services, including transit shipments, and cancellation of fees for the use of the Ukrainian pipelines.
In addition, the bill submitted by the government envisages exemption from VAT of imports of goods and services provided in the form of international technical assistance. Banking transactions when banks buy property put up as collateral should also be exempt from VAT.
Also, the Cabinet does not give up its plans to double excise tax rates for alcoholic beverages and beer as of next year to UAH 141.06 per one liter of 100% alcohol and UAH 2.48 per one liter of beer. The government also wants to increase the specific, or per unit, excise tax rate for cigarettes by 40% to UAH 318.26 per 1,000 pieces, and the ad valorem rate by 3 percentage points to 15%.
As UNIAN reported earlier, the tax reform is one of the basic conditions for the fulfillment by Ukraine of its obligations under the International Monetary Fund's Extended Fund Facility.
Earlier, the Cabinet proposed that personal income tax should be set at the level of 18% in 2016, and at 17% in 2017, while reducing single social security tax from 41% to 20%. The government also wanted to eliminate the simplified tax system for legal entities and reduce the number of groups of single tax payers to three from four.