Employer pays for health insurance: when employee does not pay taxes

Press service of the State Tax Service of Ukraine, published 03 November 2026 at 13:47 Chapter: News

Employer can pay for voluntary health insurance for employee at own expense. However, tax rules depend on who does it – resident-employer or non-resident employer.

If insurance is paid for by resident-employer

In this case, part of the medical insurance cost may not be taxed.

Resident-employer pays contributions under the employee’s voluntary medical insurance contract at own expense – amount within 30% of accrued salary of such employee is not subject to the personal income tax and military levy.

For example, if the employee is paid 30 thousand UAH of salary per month, the non-taxable amount of insurance premium is 9 thousand UAH.

If the employer paid 8 thousand UAH for medical insurance – there are no taxes.

And in the case when insurance cost 12 thousand UAH:

- 9 thousand UAH is not taxed;

- 3 thousand UAH of the excess is taxed by the personal income tax at the 18% rate and military levy at the 5% rate.

In such situation, the employee does not need to pay anything on own. Resident-employer, as a tax agent, withholds personal income tax and military levy from taxable part of income and transfers them to the budget.

It is also not necessary to submit annual declaration only because of the employer’s payment of health insurance, if all due taxes have been withheld by the tax agent.

What if non-resident employer pays for health insurance?

In this case, rules are different for the employee who is the tax resident of Ukraine.

If a foreign employer pays for voluntary medical insurance for the employee who is resident of Ukraine, the 30% tax-free limit does not apply: the entire cost of paid insurance is subject to taxation.

From the entire amount of such income, the employee must pay:

- personal income tax – 18%;

- military levy – 5%.

Non-resident is not tax agent for the personal income tax purposes. Therefore, the employee-resident of Ukraine must include such income in the annual property status and income declaration and pay personal income tax and military levy on own. Tax Code directly refers non-resident to persons who are not tax agents and income received from such persons is declared by the taxpayer on own.