Payroll and Employment Taxes in Ukraine

Overview of Payroll Taxes in Ukraine

Understanding payroll taxes in Ukraine is essential for businesses of all sizes—from startups to large enterprises. Employers are responsible for withholding and remitting various taxes, including personal income tax, military tax, and social contributions. Compliance is crucial; failure to adhere to tax regulations can result in penalties, audits, and strained employee relations. This guide aims to provide clarity on the key aspects of payroll taxes in Ukraine, covering calculations, deadlines, and filing procedures.

Fiscal Year in Ukraine

1 January - 31 December is the 12-month accounting period that businesses in Ukraine use for financial and tax reporting purposes.

Payroll Cycle in Ukraine

The payroll cycle in Ukraine is bi-weekly, with employees being paid twice a month between the 15th and 20th of each month and the 31st and 7th of the following month.

Minimum Wage in Ukraine

As of January 1, 2025, Ukraine's minimum wage is set at UAH 8,000 per month. This rate applies to all workers, and the government periodically reviews and adjusts the wage.

Bonus Payments in Ukraine

Ukranian law does not include provisions for 13th salaries.

How is Payroll Calculated in Ukraine?

In Ukraine, payroll calculations encompass several components:

 
• Gross Salary: The total agreed-upon remuneration before deductions.
 
• Deductions:
  
     
  • Personal Income Tax (PIT): A flat rate of 18% on gross income.
     
  • Military Tax: An additional 1.5% on gross income.
     
  • Unified Social Contribution (USC): Employers contribute 22% of the employee's gross salary, subject to a monthly cap.
   
 

Employers must ensure accurate calculations to determine the net salary and fulfill tax obligations.

Types of Payroll Taxes in Ukraine

Ukraine's payroll tax system includes various taxes, each with specific regulations:

Personal Income Tax (PIT)

Rate: 18% on gross income.
Purpose: Funds state budget expenditures.
Deadline: Withheld monthly and remitted to tax authorities by the 20th of the following month.

Military Tax

Rate: 1.5% on gross income.
Purpose: Supports military funding.
Deadline: Withheld monthly and remitted to tax authorities by the 20th of the following month.

Unified Social Contribution (USC)

Rate: 22% of gross salary, capped at a certain amount (e.g., UAH 160,000 as of 2025).
Purpose: Provides social insurance benefits.
Deadline: Paid monthly by the 20th of the following month.

Single Tax for Individual Entrepreneurs

Rates: Vary by group:

 
• Group I: UAH 302.80 per month.
 
• Group II: UAH 1,600 per month.
 
• Group III: 5% of income or 3% with VAT.

Deadline: Payments due by the 20th of each month for Groups I and II; Group III pays quarterly.

How to Set Up a Payroll in Ukraine

Setting up a payroll system in Ukraine involves several steps:

Registering with Ukrainian Authorities

 
• Tax Registration: Obtain a tax identification number (TIN) for the business and employees.
 
• Social Insurance: Register with the Social Insurance Fund for USC contributions.

Choosing a Payroll System

Select a payroll software or service provider to manage calculations and filings. Options include:

 
• Playroll: Offers comprehensive payroll solutions tailored to Ukrainian regulations.
 
• Other Providers: Consider local firms with expertise in Ukrainian payroll compliance.

Onboarding Employees for Payroll

Collect necessary documentation:

 
• Personal Information: Full name, address, and contact details.
 
• Tax Documents: TIN and previous employment records.
 
• Bank Details: For salary payments.

Ensure all information is accurate to facilitate smooth payroll processing.

Step-by-Step Payroll Processing in Ukraine

Efficient payroll processing involves the following steps:

Collecting Timesheets and Attendance Data

Methods: Use digital systems or manual logs to track working hours.

Calculating Salaries and Deductions

Gross Salary: Determine based on employment contract.
Deductions: Apply PIT, military tax, and USC as per regulations.

Generating and Distributing Payslips

Format: Include gross salary, deductions, and net pay.
Distribution: Provide payslips electronically or in print.

Submitting Payroll to Authorities

Reports: File monthly reports detailing wages and taxes withheld.
Deadlines: Submit by the 20th of the following month.

Paying Employees

Methods: Transfer salaries to employees' bank accounts.
Timing: Ensure payments are made promptly to maintain employee satisfaction.

How to Submit Payroll Tax in Ukraine

Employers must submit payroll taxes through the following methods:

 
• Electronic Filing: Use the State Tax Service's electronic cabinet for submissions.
 
• Bank Transfers: Remit tax payments via authorized banks.
 
• Unified Tax Account: Utilize the unified tax account for various tax payments.

Payroll Tax Due Dates in Ukraine

Payroll Contributions in Ukraine

Understanding the tax obligations for both employers and employees is crucial when operating in Ukraine's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in Ukraine.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 22% on top of the employee salary in Ukraine.

Employee Payroll Tax Contributions

In Ukraine, the typical estimation for employee payroll contributions cost is around 2.1%.

Individual Income Tax Contributions

In Ukraine, the individual income tax rate is a flat 18%, calculated uniformly across all income levels.

Pension in Ukraine

In Ukraine, the old-age pension is granted to men at 60 with 35 years of coverage, and women at 60 with 30 years of coverage. Hero-mothers with 5 or more children can retire at 50, along with specific caregiving roles or Chernobyl accident contributors. Partial or deferred pensions are also possible under specific conditions.

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Managing Common Payroll Challenges in Ukraine

Global employers operating in Ukraine often encounter unique payroll challenges that can affect compliance and efficiency, like navigating evolving tax laws and managing employee data. With a need for real-time accuracy, modern organizations must develop strategies to overcome these challenges effectively. Below, we explore some of the most common payroll hurdles and provide actionable solutions to streamline payroll processes in Ukraine.

Maintaining Accurate and Detailed Payroll Reports

Maintaining accurate global payroll reports is often challenging due to currency exchange complexities, data integration issues, and the need to keep employee information up-to-date – including tax information, hours worked, leave balances, and any changes in salary or job status. Generating accurate reports is easy with a comprehensive payroll automation tool that consolidates fragmented data sources, and can keep track of employee payments and deductions.

Keeping Up With Ever-Changing Tax Laws & Compliance Laws

In Ukraine, tax laws and compliance regulations can change frequently, presenting a significant challenge for global employers. Monitoring updates to federal, state, and local tax codes is crucial to avoid non-compliance and costly penalties, but requires significant time and resources. Partnering with local experts or a reputable global HR platform is an effective way to maintain compliance. These services can help employers stay compliant with evolving regulations while freeing up time for more strategic work.

Consolidating Multi-Vendor Payroll Analytics

Managing payroll across multiple vendors often leads to fragmented data and inefficiencies, making it difficult to consolidate analytics. These challenges can hinder decision-making, especially when trying to gain a clear view of workforce costs and trends. To address this, organizations can invest in a centralized payroll management system that unifies data from multiple vendors. A consolidated platform simplifies payroll tracking, ensures data accuracy, and provides actionable insights into payroll expenditures.

Integrating Multiple HR & Payroll Systems

Global companies are prone to using multiple HR or payroll systems across regions, which can easily lead to fragmented payroll data, increasing the risk of delays and errors in employee compensation. To combat this, seamless integration between payroll and other systems is critical.

Payroll management systems that connect with existing HR and financial platforms can help streamline workflows by reducing manual inputs and ensuring that all departments operate with up-to-date, accurate information. In turn, this helps guarantee on-time, accurate payroll, boosting employee satisfaction.

What Does a Global Payroll Management Platform Cover?

A global payroll management platform is a software solution designed to streamline and automate the payroll processes for organizations with employees across multiple countries. It helps ensure accurate and timely payment while maintaining compliance with legal and regulatory requirements in Ukraine.

Key functions of a payroll management platform can include:

   
• Consolidate payroll data: Streamline fragmented payroll data into one source of truth when you’re operating in multiple regions.
   
• Analytics and reporting: Advanced capabilities to analyze payroll data and generate automated reports per region.
   
• Monitor and standardize payroll: Get an accurate view of employee costs, bonuses, and taxes per region, catch variances, and standardize payroll processes across regions to minimize errors.
   
• Compliance and record-keeping: Maintains accurate payroll records and ensures adherence to labor laws and regulations, reducing the risk of legal issues.
   
• Employee self-service: Provides portals where employees can access pay stubs, update personal information, and manage benefits selections.

How Playroll Can Streamline Payroll & Taxes in Ukraine

Expanding globally is an exciting milestone for any company, but it comes coupled with complex payroll challenges. It doesn’t have to be complicated. At Playroll, our easy-to-implement global payroll management software combines automation with hands-on support to make global payroll truly simple. Here's how Playroll helps:

   
• Multi-Vendor Integration: Our platform syncs seamlessly with your providers and in-house systems to unify global payroll services in one platform.
   
• Standardize Payroll Processes: Unify your operations in one dashboard to ensure payroll is running smoothly globally, with advanced approval flows and reports.
   
• Improve Governance & Compliance: Improve compliance by centralizing all your compliance tasks and processes. Easily track your payment obligations, with digitized audit trails.
   
• Advanced Reporting: Access and configure your data, your way, with a comprehensive suite of payroll analytics and reporting tools.