Military tax has become indefinite: how it will affect the income of Ukrainians.

The military tax has practically become indefinite

The military tax of 1.5% on individual income, which was introduced on August 3, 2014, and was supposed to last until the end of 2014, has now practically become indefinite, and its amount has significantly increased.

This is stated in the analytics of the legal company Prove Group.

According to the Tax Code of Ukraine, taxpayers of the military tax are equated with individual income tax payers, and since 2015 the object of taxation with the military tax is not limited to payments related to labor and civil law relations. Now, almost all income received by individuals is taxed, including from property rentals, transactions, securities, investments, and dividends, according to the analytics of the legal company.

The problem of calculating the military tax

At the same time, according to him, the issue of military tax payment in the Tax Code is regulated fragmentarily, which gives the tax authorities reasons to interpret the norms at their discretion. Thus, the difficulties in calculating the tax amount arise from the fact that having determined the object of taxation with the military tax (for example, salary), the legislator left the tax base unaddressed. The base is the specific amount from which taxes are calculated and paid.

The tax authority, in turn, has not left this gap in legislation unnoted and clarified that the military tax is calculated from the income amount without deducting other taxes (ESV, insurance amounts, income tax). This has increased budget revenues at the expense of taxpayers' funds. While it would be fair to regulate in the Tax Code of Ukraine the base of the military tax, defining it as the total amount of accrued income, reduced by the amounts of other taxes.

The legislator made changes to the Tax Code of Ukraine, by which the term of this obligation is extended until the completion of the Armed Forces reform. Considering that the Concept of reforming and developing the Armed Forces provides for a number of measures until the end of 2017, and a relevant decision on the completion of the reform should be made by the Верховна Рада України, the tax actually becomes indefinite. Consequently, all the aforementioned problems may drag on for taxpayers for years if the legislator does not make clarifications to the Tax Code of Ukraine.