[World Tax News] Ukraine Imposes First Wartime Tax Hikes to Finance Its Defence Forces and More

Editorial Team – [2024] 169 taxmann.com 102 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. Ukraine imposes first wartime tax hikes to finance its defence forces

Ukraine has enacted the “Law on Amendments to the Tax Code of Ukraine and Other Laws of Ukraine to Ensure the Balance of Budget Revenues during Martial Law. Signed on 28 November 2024, the law took effect on 1 December 2024. Following several revisions, it introduces measures such as increasing and expanding the military (defence) tax along with other tax-related adjustments.

Key provisions of the law include:

(a) Increase in Military Tax on Individuals

The military tax rate on individuals has been raised from 1.5% to 5.0%, effective from 1 December 2024. According to the State Tax Service of Ukraine, the increased rate applies to income accrued from this date. For instance, income accrued in November 2024 but paid in December 2024 remains subject to the 1.5% rate. The 5.0% rate will revert to 1.5% beginning 1 January of the year after martial law ends or is revoked.

(b) Changes to Corporate Tax for Banks and Financial Institutions

A 50% corporate tax rate for banks, introduced in 2023, will continue to apply in 2024.

• From 2024, a 25% corporate tax rate applies to bank dividends and the inclusion of controlled foreign company (CFC) profits for banks. This rate will extend to all financial institutions, except insurers, starting 1 January 2025.
• Losses from prior years cannot be used to offset taxable income in 2024, but they may be carried forward and used from 2025, including those incurred in 2024.

(c) Other Tax Measures

• A military tax on income for:

1. 1. Individual entrepreneurs and Group III legal entities in the simplified tax regime at a rate of 1% of income.
   2. Individual entrepreneurs in Groups I, II, and IV at 10% of the monthly minimum wage.

• Introduction of advance corporate income tax payments for taxpayers engaged in retail fuel trade.
• An increase in the minimum tax liability per hectare of arable land to UAH 1,400.
• A change in individual income tax and social security contribution reporting from quarterly to monthly, effective 1 January 2025.

The majority of these measures are effective from 1 December 2024, except for the monthly reporting change, which begins on 1 January 2025.

Source: Official Website

2. Turkey lowers tax exemption on capital gains from shares

Turkey’s Revenue Administration has announced the issuance of Presidential Decision No. 9160, published in the Official Gazette on 27 November 2024. The decision reduces the tax exemption on capital gains from the sale of participation shares held for a minimum of two full years, lowering it from 75% to 50%.

The revised exemption also applies to gains from founders’ shares, redeemed shares, and preemptive rights held for the same duration. This amendment takes effect from 27 November 2024.

Source: Official Website

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