The new tax increase law will take effect sooner than expected: who will face challenges because of this?

On Thursday, November 28, Ukrainian President Volodymyr Zelensky signed a law on a "historic" tax increase. On the same day, the official publication of the Verkhovna Rada, "Holos Ukrainy," made this law public, meaning it will come into effect on November 29.

As a result, the military tax in Ukraine will rise from 1.5% to 5% just two days before the end of November, creating numerous challenges for businesses. This was reported by MP Yaroslav Zheleznyak on his Telegram channel.

"Well, yes... they published it today already. Tomorrow the newspaper will come out with today’s date. This will create so many inconveniences. They dragged it out for 44 days and could have waited just one more day. Instead, they created a significant problem for businesses out of nowhere. But there’s nothing to be done - the law will come into effect on November 29 (and not December 1 as promised). So for the remaining days, businesses will have to somehow recalculate at the 5% rate," wrote Zheleznyak.

According to him, this rush will indeed create issues for businesses since for 28 days of the month there was one rate (1.5% military tax), and for 2 days there will be a 5% rate. This will be a real puzzle, as entrepreneurs will face a number of questions.

"Can you imagine how much extra work this has added for businesses to figure this out????!!!! How to pay extra to those who have already received their salaries???? Why was this necessary? Couldn’t they have waited two more days? P.S. It should have been on November 30, so that it would come into effect on December 1 without breaking the month," the MP concluded.

Initially, it was planned that the law would come into effect on December 1 and that payments at the new rates would begin on January 1, 2025, for the entire previous month (December 2024).

Now, considering the timing of the law's publication, it will take effect on November 29. Thus, the military tax at the new "rate" should only be withheld for 2 days in November.

The head of the parliamentary committee on finance, tax, and customs policy, Danylo Hetmantsev, also commented on this matter. He confirmed that the law would take effect on November 29 and promised that additional clarifications regarding this confusion would be published.

"Thus, the military tax (MT) at the new rate should only be withheld for 2 days in November. As for individual entrepreneurs, we have proposed an amendment stating that the obligations for paying the MT at the new rates will apply to them from January 1, 2025, if the amendment is supported by the Verkhovna Rada next week. I am convinced it will be supported," noted the MP.

Tax Increases in Ukraine

The tax increase bill was introduced back in July. At that time, the Cabinet stated that this decision was prompted by the need to raise 500 billion hryvnias for defense funding. Part of the funds was expected to come from increased tax revenues.

It should be noted that President Volodymyr Zelensky did not sign bill No. 11416d on tax increases retroactively for 43 days because an IMF mission was operating in Ukraine.

Ultimately, the bill was signed by Volodymyr Zelensky on November 28. This was announced by MP Yaroslav Zheleznyak. According to him, this law is expected to replenish the state treasury by 8 billion hryvnias this year and more than 130 billion next year.

Earlier, "Telegraph" reported on why the authorities abandoned economic reservations. After thorough discussion of this initiative, parliamentarians decided to completely abandon it, likely due to concerns about societal division and potential corruption risks.