Key changes to the tax legislation in 2025

Below is the summary of the main tax changes taking effect in 2025.

Transfer pricing

• “Economically associated enterprises” as a new criterion for determining whether a party may be treated as related.

If an enterprise has a significant volume of transactions with an unrelated non-resident (transactions with such non-resident account for 75% or more of the income (expenses) with all non-residents, or 50% or more of the taxpayer’s total income (expenses), the transaction may be considered controlled.

• Changes in determining whether a party may be treated as related in case of indirect ownership.

If the participatory interest of each party in the next legal entity in the ownership chain is 25 (previously 20) percent or more, all parties in such chain are considered related (regardless of the multiplication product).

• It is now possible not to consider transactions with entities included in the CMU List of legal forms of non-residents as controlled.

Transactions with such non-residents may be recognized as uncontrolled if Ukraine and the country of such non-resident have concluded an international double taxation treaty. It is required that a certificate of residence in the relevant country be submitted by October 1.

Previously, it was required that a certificate of actual payment of income tax by a non-resident be provided, which was rather challenging in practice. This mechanism has been canceled.

• The number of low tax jurisdictions has been reduced.

The CMU has significantly amended the list of low tax jurisdictions. Thus, the list excludes the UAE, Ireland, Liechtenstein, Cyprus, Moldova, and Hong Kong. The countries with which Ukrainian companies are least likely to do business, such as American Samoa, Guam, and the DPRK, have been added. These changes may be considered positive for Ukrainian business.

It is still unclear whether this list is applicable to the 2025 transactions or it becomes effective in 2026. We recommend requesting an individual tax ruling. For more details please refer to the Tax Alert.

• Changes in the penalty amounts (effective 25 March 2025):
  • Increase in penalty for failure to submit a notification on participation in a multinational enterprise group from 50 to 100 minimal costs of living (UAH 300 thousand as of 01 January 2025).
  • Decrease in penalty for untimely submission of such notification from 100 to 50 minimal costs of living (approx. UAH 150 thousand as of 01 January 2025).
  • Failure to timely include a transaction in the report on controlled transactions: the existing penalty that amounts to one minimal cost of living for each day of delay has been limited to a maximum of 0.5% of the transaction amount. This change is quite positive.

Other changes to the tax legislation taking effect in 2025

Other changes to the tax legislation coming in effect in 2025 include:

• Increase in the basic corporate income tax rate from 18% to 25% for financial institutions (except for insurers).
• Expiration of VAT, corporate income tax, and land tax exemptions, including for aircraft manufacturers.
• Changes in personal income tax and military tax:
  • Monthly submission of reporting on personal income tax, military tax, and single social tax.
  • Introduction of military tax for individual entrepreneurs.
• The following changes will apply to Diia City residents:
  • Exit capital tax exemption for pension contributions under the non-state pension schemes and for insurance payments made under the voluntary health insurance contracts for the resident’s employees and gig specialists.
  • Exit capital tax exemption for the value of charitable contributions for the state defense needs.
• Exclusion from tax accounting of expenses and transactions related to the provision of unlawful benefits to officials (including foreign representatives), effective as of 25 March 2025.
• Changes in the calculation of rent tax liabilities, excise tax, and minimum tax liability.
• Other changes that may be relevant for certain industries and categories of taxpayers can be found in the press release of the State Tax Service of Ukraine.

_{The comments of Deloitte experts provided herein are for informational purposes only and should not be relied upon by taxpayers without a detailed expert analysis of the specific matter.}

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