Regarding application of Paragraphs 164.5 and 164.6 Article 164 of the Tax Code of Ukraine (hereinafter – Code) in the process of calculating the military levy on income specified in Paragraph 164.2 Article 164 of the Code

Press service of the State Tax Service of Ukraine, published 01 April 2024 at 12:25 Chapter: News

Article 163 of the Code stipulates that subject of military levy’s taxation of a resident (non-resident) taxpayer is, in particular, total monthly (annual) taxable income.

At the same time, Article 23 of the Code stipulates that specific cost, physical or other characteristics of a certain taxation object are recognized as the tax base.

Tax base is a physical, value or other characteristic expression of taxation object to which tax rate is applied and which is used to determine amount of tax liability.

Tax base and procedure for determining it are established by the Code for each tax separately.

Herewith, in cases stipulated by the Code, one taxation object can form several tax bases for different taxes.

In cases stipulated by the Code, a specific value, physical or other characteristic of certain taxation object may be taxation basis for various taxes.

At the same time, please note that Article 164 of the Code establishes specifics of determining basis of personal income tax for income in non-monetary form, namely: taxation basis of this tax is value of such income, calculated at ordinary prices, rules for determining which are established according to the Code, multiplied by the coefficient, which is calculated according to formula determined by Paragraph 164.5 Article 164 of the Code, namely:

K = 100 : (100 – amount of tax), where K is coefficient; Amount of tax – rate established for such income at the time of its accrual.

That is, only tax rate not levy is used to calculate the coefficient, and therefore there are no legal grounds for applying coefficient calculating military levy on income in the non-monetary form.

In addition, according to Paragraph 164.6 Article 164 of the Code, calculating income in the form of salaries, the personal income tax base is defined as accrued salary, reduced by the amount of insurance contributions to the Savings fund, and in cases provided for by the law, national insurance contributions to the non-state pension fund, which, according to the law, are paid from the employee's salary, as well as amount of tax social benefits, if any.

Taking into account above specified and the fact that provisions of Paragraph 16¹ Sub-section 10 Section XX "Transitional Provisions" of the Code do not directly establish procedure for determining tax base for the military levy, in particular, taking into account peculiarities established in Paragraphs 164.5 and 164.6 Article 164 Section IV of the Code for tax on income of individuals, then determination of tax base for the military levy is carried out by tax agents without applying provisions of Paragraphs 164.5 and 164.6 Article 164 of the Code.