Tax Planning in Ukraine

Ukraine is becoming an important destination for investment. The country has already emerged as a hub for military and defense-related technology, agrobusiness, renewable energy and IT—sectors that are attracting foreign interest. In the longer term, Ukraine is expected to become a key market for large-scale reconstruction and infrastructure projects, while maintaining a strong focus on military and near-military industries. In this environment, tax planning is more than a routine consideration—it is a strategic necessity.

Ukraine has introduced several tax incentives to attract and support investment. This article provides an overview of the main preferential tax regimes and investment-related benefits currently available in Ukraine.

Industrial Parks

Industrial parks are designated zones designed to attract investment, stimulate industrial growth and create jobs. Backed by the government’s Industrial Parks Development Strategy for 2023–2030, these parks are seeing increased activity. In 2024, a record number of parks were registered, projected to create around 11,000 jobs.

Eligible business activities include processing industries, waste recycling (excluding landfills), energy production and storage (especially from alternative sources), biotechnology, telecom and IT services.

Tax Benefits for Park Participants Include:

• Corporate income tax exemption: Participants are granted a 10-year exemption from 18% corporate income tax on qualifying park-related income.
• Real estate tax relief: Local governments can apply reduced or zero real estate tax rates for non-residential property within industrial parks.
• Land tax incentives: The land tax may be fully or partially waived for valuated plots within industrial parks.
• Import duty and VAT exemptions: New equipment and related components imported for use exclusively within the park are exempt from import duties and Ukraine’s 20% import VAT.

These incentives significantly lower the entry costs for industrial projects and enhance after-tax returns.

Significant Investment Projects

To support large-scale investments, Ukraine has enacted a special law on significant investments. Projects must exceed EUR 12 million, create at least 50 new jobs with salaries above the regional average and be completed within five years. State support is capped at 30% of the total investment.

The project must be carried out through a Ukrainian legal entity that is 100% owned by the investor. Foreign investors must establish such entity before signing the investment agreement. UkraineInvest, a dedicated investment promotion body, provides support during the application and negotiation stages.

Key Tax Incentives Include

• Corporate tax exemption: Five-year exemption from the 18% corporate income tax.
• Customs and VAT relief: Exemption from import VAT and customs duties on equipment and components imported for the project.

These benefits make the program one of the most generous in the region for large capital investments.

Diia City for the IT industry

Ukraine’s Diia City is a special tax and legal regime for tech companies and IT professionals. It is open to both Ukrainian and foreign-owned companies engaged in software development, IT services, R&D and related fields. Diia City has been praised for its investor-friendly approach, with 98% of participants reporting satisfaction with the regime.

Key Tax Options for Diia City Residents:

• Corporate taxation: Companies can choose between:
  • A 9% tax on withdrawn capital
    or
  • The standard 18% corporate income tax
• Dividend relief: Dividends distributed by 18% tax-paying Diia City residents to non-resident shareholders are exempt from the 15% withholding tax
• Individual tax benefits:
  • Under either employment or “gig” contracts: 5%  personal income tax (PIT), 5% military tax, and 22% social security contributions (on minimum wage)
  • Income above approx. €190,000 is subject to regular 18%  PIT

Additionally, dividends paid no more than once every two years are exempt from personal taxation in Ukraine.

Private Entrepreneurs (PE)

For individuals, Ukraine offers the possibility to register as a Private Entrepreneur (PE), a simple and cost-effective structure suitable for small-scale or freelance business activities.

Main features of the PE tax regime:

• Unified tax rate:
  • 3%  of gross income + 20% VAT
    or
  • 5% of gross income without VAT
    AND
  • 1% military tax.
• No expense deductions are allowed; the tax base is total income received
• Social security contributions – minimal
• Annual income cap: UAH 9,336,000 (approx. €204,000) for 2025

Individuals who registered as unlimited tax residents in Ukraine can use this simplified regime. For foreign individuals considering relocation or long-term business in Ukraine, PE registration may be a flexible entry point.

Unified Single Tax for Small Companies

Small Ukrainian companies—including limited liability companies—can benefit from a similar Unified Single Tax regime, provided that:

• Annual income does not exceed UAH 9,336,000 (approx. €204,000) for 2025
• Business activities are not on the exclusion list for the regime

Tax rates:

• 3% of gross income + 20% VAT
  or
• 5% of gross income (without VAT)

This tax replaces corporate income tax, VAT (if the 5% option is used), and land tax (if the land is used for business activities). Companies must maintain simplified bookkeeping but must ensure compliance with documentation and reporting standards.

Employees can be hired without restriction. The company must act as a tax agent for payroll taxes, including:

• 18% personal income tax
• 5% military tax
• 22% social security contribution

Cash registers are required unless the company only accepts non-cash payments.

Special Regime for the Agricultural Sector

Agricultural producers with at least 75% of revenue from qualifying agricultural activities can elect to pay the Unified Single Tax under Group 4, based on monetary valuation of land areas (owned or leased), rather than derived incomes.

Tax rates are applied per hectare, based on land type and location:

• Arable land: 0.95%
• Mountainous/Polissya zone arable land: 0.57%
• Perennial plantations: 0.57% (0.19% in special zones)
• Water fund lands: 2.43%
• Greenhouse land: 6.33%

This regime supports capital-intensive farming by simplifying tax compliance and stabilizing tax liabilities, regardless of yield or commodity prices.

Final Thoughts

Ukraine’s tax incentives reflect its ambition to become a competitive investment destination. From high-tech industries to agriculture, the country offers targeted incentives that can significantly improve after-tax returns for both local and international investors.