Ukraine’s finance ministry proposes to remove tax relief schemes for IT businesses

Source: Nina Yuzhanina

Ukrainian senior MP  Nina Yuzhanina revealed that the Ministry of Finance has proposied that the country’s IT professionals should be stripped of a tax relief scheme.

The recent debate in the tax and customs committee revolved about raising taxes, focusing on the Diia.City scheme. According to Yuzhanina, businesses who signed up for from Diia.City tax relief asked that the military tax rate for their sector remain unchanged, citing government promises to maintain the current regime for 25 years.

They argued that the tax hike could see the state budget ending up with the loss in revenues  as IT professionals might shift to the third group of private entrepreneurs (FOP) that grangts lower taxes.

“There was a suggestion to raise the military tax rate for the third group of FOPs beyond 1% of turnover (as outlined in the proposed legislation). The reasoning is clear: with 5% PIT and 5% turnover tax, the playing field is level. But if the military tax rises from 1.5% to 5% and FOPs remain at 1%, many will switch to the FOP system,” Yuzhanina explained.