Ukrainian government to maintain simplified system of taxation

The Ukrainian government in the framework of implementing commitments to its key creditor, the International Monetary Fund (IMF), will maintain the existing simplified system of taxation of businesses, but will strongly fight against attempts of large companies to use this system for tax avoidance, according to a posting on the government`s Twitter page.

”A simplified system [of taxation] has been maintained in the draft Tax Code submitted by the government. But the government will counter large companies that are `disguised` as payers of the simplified taxation system to avoid taxes,” the statement read.

The government has also denied the allegations that it is IMF requirement to abolish the simplified system of taxation, calling them a myth.

As UNIAN reported earlier, the simplified system of taxation of businesses has been effective in Ukraine since 2010 and is mainly applied to small and medium-sized businesses. It stipulates that the amount of single social security tax depends on the size of the company, the number of employees and fields of activity. The system has recently undergone a number of changes. In particular, the number of groups of single social security taxpayers has been reduced to three instead of four, and the eligibility criteria – annual income – has been decreased from UAH 20 million to UAH 5 million.

Discussions have been held in Ukraine since 2015 as to whether the simplified system is used as a loophole by large businesses allowing them to avoid taxes that they would have to pay according to the general system of taxation. IMF experts and government advisers have stressed the need to revise the simplified system of taxation. In particular, the Group of Strategic Advisors on the Support for Reforms in Ukraine co-chaired by Ivan Miklos and Leszek Balcerowicz suggested that the simplified taxation system should be maintained only for individual entrepreneurs.

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