Have received compensation for moral damage? Whether it is needed to pay taxes on it depends on the basis for payment and its amount.

As a general rule, compensation for moral damage is included in taxable income of individual. At the same time, the Tax Code provides exception for compensation, amount of which is determined by the court decision.

When is compensation not taxable?

If it is specifically about compensation for moral damage, then the Tax Code of Ukraine provides that the following are not taxable:

- compensation for moral damage by the court decision – within limits of four minimum salaries as of January 1 of relevant year, i.e. up to 34 588 UAH in 2026;

- compensation for moral damage in amount directly determined by the law;

- amounts that the state compensates for illegal decisions, actions or inaction of pre-trial investigation bodies, the prosecutor’s office or the court are not separately included in taxable income;

- separate exception is also provided for payments from the state budget under decisions of foreign jurisdictional bodies, particularly the European court of human rights.

If the court ordered a big amount

If compensation exceeds 34 588 UAH, not the entire amount is taxable, but only the excess amount.

Minimum salary is 8 647 UAH in 2026. Therefore, the non-taxable amount of compensation for moral damage by the court decision is 34 588 UAH.

For example, if 50 000 UAH is ordered to a person of moral damage by the court decision:

34 588 UAH are not taxable;

15 412 UAH are taxable.

From the excess amount, the following are paid:

- personal income tax – 18%;

- military levy – 5%.

Who pays taxes and is it necessary to submit tax declaration?

If compensation is paid by legal entity that is a tax agent, it is the entity that withholds personal income tax and military levy from the taxable part of compensation and transfers them to the budget. Recipient is not required to pay these taxes separately. It is also not necessary to submit annual declaration solely due to the receipt of such compensation if all due taxes have been withheld by the tax agent. Income received exclusively from the tax agents does not in itself create an obligation to submit declaration.

If the taxable compensation is paid by a person who is not the tax agent, the recipient must include such income in annual declaration and pay personal income tax and military levy on their own.

And if compensation for moral damage is not paid by the court decision and the law does not provide for a separate exemption for such payment, the entire received amount is taxed on a general basis. If compensation is paid by a person who is not the tax agent, such income must also be declared.