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Independence Square in Kiev, Ukraine
Under proposals in a draft bill, businesses with a yearly turnover of up to 10bn hryvnia (£256m) will pay a single tax, with entrepreneurs subject to a 2% levy instead of income taxes, Ukrainian prime minister Denys Shmyhal confirmed yesterday.
Firms and taxpayers will also be exempt from paying land taxes on areas in current conflict areas, and VAT is also suspended on goods handed over for national defence.
Shmyhal said: “We must shape a solid economic rear that will allow us to provide the army and the country with everything they need: from nutrition and medicines to ammunition and modern weaponry.
“Obviously, the economic and tax system that existed in peacetime is unable to correspond to the challenges we are facing nowadays.
“Therefore, in close cooperation with the president of Ukraine, with the Verkhovna Rada people’s deputies, we have embarked on a complete reformatting of the economic model of Ukraine.”
Taxes for people in the first and second income tax will pay a voluntary rate, whilst the state will cover unified social contributions for workers fighting in the conflict.
Fuel duty will also be abolished, while the VAT rate on these items will be reduced from 20% to 7%, Shmyhal added.
The government is seeking to fast-track the draft bill, after martial law was imposed last month following the Russian invasion.
Additionally, Ukrainian farmers will receive interest free loans from a 25bn hryvnia (£641m) pot, to help businesses that are looking to sow over this year.
These loans will be administered by retail banks, with the Ukrainian government underwriting 80% of the value.
The cabinet said it will amend all necessary bylaws to ensure the new tax system is operational this week.
On Monday, president Volodymyr Zelenskyy said that the government intends to remove obstacles facing businesses in the wake of economic crisis caused by the conflict.
He said: “A new tax model is needed for the war and for the post-war development.
“The financial rules also need to be updated. To make people feel that they can be flexible.”
Earlier this week, the IMF forecast that the conflict could lead to an economic contraction of close to 35% this year.
