In the Letter No. 9788/7/17-1117 dd. 04.04.2012 the State Tax Service of Ukraine explained the procedure for calculating the base of individual income tax.
The STS noted that the object of taxation (for both residents and nonresidents) is, in particular, the total monthly (annual) taxable income consisting of the sum of taxable income accrued (paid or provided) for a tax reporting period.
In cases where certain types of taxable income are not taxed when accrued or paid but are not exempt from taxation, the taxpayer itself is obliged to include the amount of such income in the gross annual taxable income and file an annual return on that tax in due time. Individual entrepreneurs shall indicate other revenue from sources in Ukraine and foreign income along with income from their business activities and shall note down the advance payments of personal income tax.
In determining the tax base all income tax received by a taxpayer in cash or in kind shall be taken into account.
In accruing income in the form of salary the tax base shall be determined as the gross salary reduced by the sum of a single social payment, insurance premiums to the Savings Fund, and in certain cases – of mandatory insurance contributions to the non-state pension fund, as well as by the amount of social tax benefit, if any.
The tax rate shall be 15% of the income tax base (except for certain cases). If the total amount of income received by the taxpayer in the reporting month exceeds ten minimum wages as established by law at January 1 of the reporting year – the tax rate shall be 17% of the excess amount, taking into account the tax paid at 15% rate.
The final calculation of personal income tax for the reporting year shall be made by the taxpayer itself in accordance with the data indicated in the annual tax return, taking into account the personal income tax paid during the year and the amount of payment for a trade patent based on documentary confirmation of their payment.
Procedure for calculating the tax liability of an individual that receives different types of income will be as follows:
- to determine the sum of the monthly taxable income for each single month as an amount of taxable income from various types of activities,
- to calculate the tax at the rate of 15% based on the determined monthly taxable income; if the amount of taxable income exceeds a ten-fold minimum wage, part of taxable income within the ten-fold minimum wage is taxed at 15%, and the rest of the income exceeding the ten-fold minimum wage – at the rate of 17%;
- to calculate the final annual tax amount as a sum of monthly tax liabilities, as determined in the allocation of each single monthly taxable income;
- to reduce the tax amount determined in the allocation by the tax amount paid by the taxpayer at the date of submitting the tax return;
- if the annual allowable tax amount exceeds the tax actually withheld over the tax year, the taxpayer shall pay the amount of tax liability equal to the amount of such excess prior to August 1.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
