New taxes for individual entrepreneurs from 2025: what will change and who will be affected

Starting from January 1, 2025, taxes will increase for sole proprietors and individuals: what is known about itOn December 1, 2024, a law known as the “resource” law on tax increases came into force in Ukraine, which has a significant impact on sole proprietors and legal entities operating under the simplified taxation system.

The law was signed by President Volodymyr Zelenskyy after numerous adjustments, and its publication was delayed for several days. The main innovation was an increase in the military tax rate and the introduction of new taxation rules for certain groups of taxpayers.

Reported by UNN with reference to the Ministry of Finance of Ukraine.

Details

As previously reported, President of Ukraine Volodymyr Zelenskyy signed Law 11416-d on a “historic” tax increase, also called a “resource tax.” According to MP Yaroslav Zheleznyak, the law was planned to be published on November 30, with the aim of entering into force on December 1.

However, on November 29, it was reported that the publication of the law on tax increases had been withdrawn. It was published on November 30, and accordingly, it came into force on December 1.  

Draft law No. 9319  on taxation of remuneration for gigabit contracts of Diia City residents was supported by the Verkhovna Rada in the second reading. “1] 268 MPs voted in favor.  

It was the amendment that corrected the tax bill 11416d and the “retroactive date” where taxes were postponed from October 1 to January 1, 2025 for individual entrepreneurs

On December 3, the Verkhovna Rada Committee on Finance, Taxation and Customs Policy amended the draft law “On Amendments to the Tax Code of Ukraine and Some Other Legislative Acts to Stimulate the Development of the Digital Economy in Ukraine”, according to which the new taxation will also apply to individual entrepreneurs of the third group from January 1, 2025.

What does the Law provide for?

For sole proprietors of the first, second and fourth groups, the military tax rate will be 10% of the minimum wage, which is set at UAH 8,000 as of the beginning of 2025. This means that the military fee for such sole proprietors will be UAH 800 per month. The changes apply to the payment of this fee starting from January 1, 2025.

Single tax payers of the third group, both individual entrepreneurs and legal entities, will have to pay a military tax of 1% of their turnover, and the first payments will be made in the first quarter of 2025.

Also, the military fee will not be charged retroactively. That is, individuals will not be forced to pay the fee for 2024, and their total annual income for 2024 will be subject to the military fee at a rate of 1.5%.

However, certain income, in particular from property transactions, as well as income in the form of the value of inherited or donated property, will be subject to military duty at a rate of 5% from 1 December 2024.

Starting from January 1, 2025, the military tax rate for all personal income to be reported in the annual tax return will increase to 5%. 

Significant changes also apply to the taxation of domestic government bonds, including military bonds. They will continue to be exempt from personal income tax (PIT) and military duty.

Social payments, pensions, scholarships and other income that are not subject to personal income tax will also not be subject to military duty.

It is worth noting that the military and law enforcement officers will remain subject to the military duty rate of 1.5%, as provided for by law for this category of persons.

Since the beginning of Russia's full-scale invasion of Ukraine, the state budget has been divided into two main parts - military and social and humanitarian.  

All military expenditures, which will reach UAH 2.23 trillion or 26.3% of GDP in 2025, are financed by domestic revenues and borrowings.

Recall

 After the signing of the law on tax hikes, there has been a massive closure of individual entrepreneurs in Ukraine. More than 1000 entrepreneurs are closing down every day, which is significantly higher than the usual rate of 700 closures.