Draft Law of Ukraine

"On Personal Income Tax"

Prior to this Verkhovna Rada reviewed 4 alternative draft laws, which were then sent for revision. On the basis of the abovementioned versions there had been prepared the draft law N 1111-D that was adopted by the Verkhovna Rada in first reading on November 21.

This draft provides for detailed determination of some provisions as to the tax collection. For example, there is a suggestion to establish a special norm on tax agents (employers of taxpayers), to outline precisely regulations on tax addresses and representatives of taxpayers and tax agents. It is proposed to define what is meant under ‘profits from foreign sources’.

There is envisaged a possibility of advanced payment of personal income tax. This draft contains such concept as ‘total costs and losses’ on the analogy of enterprise profit taxation.

The author of the draft proposes to tax personal incomes at the rate of 10, 15, 20 percent.

This draft determines particularities of taxation regarding profits resulting from some transactions (alienation of apartments and private houses).

This draft specifies the following special taxation regimes:

• taxation of self-employed individuals;
• taxation on the basis of special trade patent;
• simplified taxation regime for natural persons owning small businesses (fixed tax).

This draft suggests reduction of taxpayers’ incomes by the amount of total costs and tax deductions. According to this legislative act taxed income may be reduced by definitely determined amounts. Such approach may complicate the tax administering and taxpayers will have to increase own costs for accounting of tax related expenses and proceeds.