Corporate profit taxation in Ukraine

Ukrainian entities and foreign entities doing business in Ukraine through a permanent establishment are liable for corporate profit tax.

The Corporate Tax Law provides for the taxation of the following persons:

• Legal entities organized under the laws of Ukraine and which carry out business in Ukraine;
• Foreign entities which get a profit from sources in Ukraine (the profit arises from activities performed or property located in Ukraine, in case of dividends, interest, royalties and other passive income, the income is paid by a resident of Ukraine)
• Non-resident legal entities which carry out business activities on the territory of Ukraine through a permanent establishment;

The corporate Tax Law established a basic corporate tax rate of 23%. This is a standard rate from the clean income (i.e. gross income) for the entities and natural persons - private entrepreneurs. However, small legal entities may choose the simplified taxation. Thus VAT - registered entities pay 6% of their sales proceeds under the simplified tax system, while non -VAT - registered entities pay 10%.

Deduction of Tax at Source Payments to non-residents are subject to tax withholding rates as follows:

• Dividend - 15%
• Interest - 15%
• Royalties - 15%

· Progressive and Regressive Tax

A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes attempt to reduce the tax incidence of people with a lower ability-to-pay, as they shift the incidence increasingly to those with a higher ability-to-pay.

Progressive taxation often must be considered as part of an overall system since tax codes have many interdependent variables. For example, when refundable tax credits and other tax incentives are included across the entire income spectrum, the United States has the most progressive income tax code among its peer nations, although its overall income tax rates are below the (Organisation for Economic Cooperation and Development) average.

The term is frequently applied in reference to personal income taxes, where people with more income pay a higher percentage of that income in tax than do those with less income. It can also apply to adjustment of the tax base by using tax exemptions, tax credits, or selective taxation that would create progressive distributional effects. For example, a sales tax on luxury goods or the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption or decreases a tax burden on low end consumption respectively.

The opposite of a progressive tax is a regressive tax, where the relative tax rate or burden increases as an individual's ability to pay it decreases. Sales taxes are often criticized because low income households must pay a greater share of their disposable income to a sales tax than wealthier households. In between is a proportional tax, where the tax rate is fixed as the amount subject to taxation increases.

A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, where the average tax rate exceeds the marginal tax rate. In terms of individual income and wealth, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

It can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Regressive taxes tend to reduce the tax incidence of people with higher ability-to-pay, as they shift the incidence disproportionately to those with lower ability-to-pay. The opposite of a regressive tax is a progressive tax, where the marginal tax rate increases as the amount subject to taxation increases. In between is a flat or proportional tax, where the tax rate is fixed as the amount subject to taxation increases.

The term is frequently applied in reference to fixed taxes, where every person has to pay the same amount of money. The regressivity of a particular tax often depends on the propensity (склонность) of the tax payers to engage in the taxed activity relative to their income. In other words, if the activity being taxed is more likely to be carried out by the poor and less likely to be carried out by the rich, then the tax may be considered regressive. To determine whether a tax is regressive, the income-elasticity of the good being taxed as well as the income-substitution effect must be considered.