Recently, the Cabinet of Ministers registered a draft law in the Verkhovna Rada that has caused significant public concern. Essentially, it proposes the introduction of new taxes and levies that will affect individual entrepreneurs, legal entities, and citizens of Ukraine.

The bill in question is №11416, “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding Taxation During the Period of Martial Law.”

First and foremost, the increased taxes will hit people’s wallets. Some provisions of this bill will especially worsen the situation for small and medium-sized businesses.

The key points include:
• Increase in military tax: for individuals – up to 5% of income.
• For legal entities (corporate income taxpayers and single tax payers of the 3rd and 4th groups) – 1% of income.
• For individual entrepreneurs on a single tax of the 1st, 2nd, and 4th groups – 5%.
• For individual entrepreneurs on a single tax of the 3rd group – 1%. In other words, the taxation of Ukrainian citizens’ income will now be not 19.5%, but 23%.
• Other taxes and fees: 15% military tax on the purchase of a new car (except for cases of providing vehicles to persons with disabilities).

Many experts argue that tax increases are not effective and could lead to a difficult situation for the majority of Ukrainians. Many entrepreneurs may either close their businesses or operate in the “shadow” economy.

As an Association representing the small and medium fuel and energy business, we believe that raising taxes will significantly worsen the situation in the fuel market. Over time, this could lead to a shortage of fuel for consumers in the regions.

“The bill also proposes introducing a monthly advance payment of corporate income tax for fuel sellers ‘in the amount of 0.5 minimum wages, established by law as of January 1 of the reporting (tax) year, calculated per cubic meter of tanks for storing gasoline, diesel fuel, and liquefied gas.’

Typically, one gas station that sells gasoline, diesel, and liquefied gas has storage tank volumes of 60 cubic meters, meaning that each gas station must pay 240 thousand hryvnias monthly (or almost 3 million hryvnias annually).

For large fuel market players, whose gas stations are in major cities and who have significant profits from fuel sales, such advance expenses may go unnoticed. However, this could lead to the closure of many gas stations that mainly supply fuel to the population and businesses in small villages and settlements,” explains lawyer Alina Potapovich, a member of the “Fuel and Energy Business Association.”

The increase in fuel prices that will follow these changes will lead to price increases for almost all types of products and services. During martial law, most Ukrainians have already found themselves in vulnerable and difficult situations. Such changes could lead to a significant deterioration in the socio-economic situation of ordinary people.

Moreover, during blackouts, most businesses use electricity generators powered by fuel. This could also lead to the loss of some businesses and further worsen the overall taxation situation.

We will monitor the developments around the new tax bill №11416 and gather expert opinions and real business cases on this matter.