Ukrainian lawmakers have proposed that individual income tax should be cut from 15-20 percent to 10 percent, and a 20 percent single social security tax should be set, according to a bill on draft tax reform registered in the parliament by 114 lawmakers on Monday.
The lawmakers proposed that a 5 percent tax rate should be set for dividends that are paid by tax payers on distributed profit and 20 percent for dividends which are paid by non-payers of tax on distributed profit, as wells as prizes and gifts.
It is proposed that the limit for taxation of pensions should be increased to 10 subsistence wages set for disabled persons (which covers the largest pensions), and the number elatives of those subject to the first degree of inheritance tax should be expanded (including grandparents, grandchildren, and siblings).
The draft proposes dividing individual income tax in the 50 to 50 ratio between local budgets according to the place of residence of taxpayers, and local budgets according to the workplace of taxpayers.
In addition, it is foreseen that a new taxation system for income from operations (include business operations) for the general taxation system should be introduced: it is planned to add two more categories of taxpayers. The first one (small single operations) with payments of individual income tax at the fixed rate would include the following types of operations: retail, provision of personal services to the public and traditional folk crafts. The annual income volume for this category is up to 250 minimum wages (Hr 304,500 in 2015). Businessmen will register via filing applications to local self-government agencies, which would present information to the State Fiscal Service. The tax rate would be 10 percent of the minimum wage a month (Hr 121.80 in 2015). Taxpayers of this category would not register as businessman, keep accounting papers and they will be able to define the single social security tax base themselves.
The second category would include businessmen and individuals who are carrying out independent professional operations, the number of employees is not restricted, and the annual income volume is up to 4,000 minimum wages (Hr 4.872 million in 2015). Income would be subject to taxation (the difference between revenue and expenses) and the tax rate is 10 percent. Taxpayers may not use cash registers with income of up to Hr 1 million and they will be able to define the single social security tax base themselves.
The third category of taxpayers includes businessmen with an annual income of over 4,000 minimum wages. They are VAT payers in accordance with general practice. Profit would be taxed at the rate of 10 percent. Taxpayers would account for revenue and expenses, and they will be able to define the single social security tax base themselves. Tax social benefit is revoked for these taxpayers, but the tax discount system is to be improved: current tax discounts are retained (for education, insurance, payment of mortgage rates, charitable contributions, etc.); the discount would be given to a family member if income per family member does not exceed two minimum wages (Hr 2,436 in 2015). The sums of social tax discount are agreed in the tax agencies, and the size of the discount is defined in the form of a reduction of the monthly income of taxpayers per one minimum wage (Hr 1,218 in 2015) per each family member.
The document also cancels the highest rate for single social security tax, it revokes single social security tax paid from wages of individual employees – 2percent, 2.6 percent, 2.85 percent, 3.6 percent and 6.1 percent. The draft law sets the common single social security tax base for self-employed persons.
