On New Year’s Eve, the parliament is planning to adopt tax changes. Will taxes increase as a result, and for whom in the first place?
We analyzed the bill # 4101 on tax changes in 2021, which has already been included in the agenda.
Taxes for sole proprietorship
ERU payments cannot be avoided
The bill proposes to oblige the sole proprietor (except for simplified persons) and persons carrying out independent professional activities and simultaneously working at work to pay ERUs (as an entrepreneur) from the amount of excess of income from entrepreneurship over wages.
Let’s say a person works as an accountant and receives a conditional salary of 10 thousand hryvnias, with which he and his employer pay taxes. At the same time, this person is a sole proprietor and receives an average of 15 thousand hryvnias, therefore, for the difference of 5 thousand hryvnias (15 thousand – 10 thousand), you will have to pay ERUs in the amount of 1,100 hryvnias from the activity of the sole proprietor.
What taxes will an individual entrepreneur pay in 2021?
Taxes for 1 group of sole proprietors:
- ERUs – 1,320 hryvnia (22% of the minimum wage).
- Single tax – 227 hryvnia (10% of the living wage).
Taxes for the 2nd group of sole proprietors: - ERUs – 1,320 hryvnia (22% of the minimum wage).
- Single tax – 1,200 hryvnia (20% of the minimum wage).
Taxes for 3 groups of sole proprietors: - ERUs – 1,320 hryvnia (22% of the minimum wage)
- 5% of income or 3% + VAT
Taxes for sole proprietorship 2021 / Infographic 24 channel
From July 1, the ERU for all will grow to UAH 1,430 due to the increase in the minimum wage.
Sleeping FLPs
The deadlines for writing off debts on ERUs to individuals-entrepreneurs who do not carry out entrepreneurial activities have been extended until March 1, 2021.
Moratorium on checks will be canceled
The moratorium on tax audits and checks on ERUs, which were introduced during the quarantine, may be canceled. If earlier, it was introduced from March 18 until the end of quarantine, now, regardless of whether there is quarantine in 2021, checks will be carried out.
Excise taxes will increase
The bill provided for an increase in the excise tax on alcohol and alcoholic beverages. For example, the excise tax on beer is proposed to be increased from 2.78 hryvnia to 3.10 hryvnia, the excise tax on sparkling wines – from 11.65 hryvnia to 13 hryvnias, and wine from 8.02 hryvnia to 8.95 hryvnia per liter of product.
This will affect prices accordingly. Interestingly, despite the crisis and the devaluation of the hryvnia, alcohol prices in Ukraine remained almost unchanged over the year – they increased by 5% in October compared to October 2019, according to the State Statistics Service.
They also increased the punishment for violations. If the taxpayer does not pay the excise tax on time (15 days after receiving the excise stamps), then the penalty will be 20% of this tax. The authors of the bill calculated that in this way it is possible to attract 3.9 billion hryvnias to the budget.
Liquids for electronic cigarettes will also be subject to excise duty from January 1. This applies to new products. Those that were produced or delivered before 2021 can be sold without excise tax until June 30, 2021.
Environmental tax
The environmental tax is paid on the actual volumes of various emissions, discharges, waste disposal in the environment. From 2021 it can also be increased. For example, a three times higher tax can be collected for carbon dioxide emissions – 30 hryvnia per ton instead of 10 hryvnias. In general, the environmental tax will grow by 11.6%.
The rent will rise
It is proposed to increase the rent for the special use of subsoil, water, forest resources by 12%. For the use of radio frequency resources – by 11.6%.
Real estate taxes
Now, for certain categories of the population, there are benefits for real estate tax if it is rented, leased, loaned, and the like. If the law is adopted in the current version, then these benefits may be narrowed.
If an orphan child or single mother will rent out his property, he will be obliged to pay real estate tax on such property. The same applies to hostels, orphanages, MAFs, churches and the like.
Property tax
Ukrainians pay real estate tax for the so-called “extra” square meters.
It:
- apartments with an area of more than 60 square meters;
- private houses with an area of over 120 square meters;
- apartment + house with a total area of more than 180 square meters.
In 2021, the tax rate per square meter will not exceed 1.5% of the minimum wage. The size of the rate depends on the local authorities, who set it.
In 2021, they will pay tax for the last year, that is, until 2020. The corresponding tax rate will be calculated on the size of the minimum wage as of January 1, 2020 (4,723 hryvnias) and will amount to a maximum of 70 hryvnias 85 kopecks for each “extra” meter.
That is, the owner of an apartment of 90 square meters will pay a maximum of 2,125 hryvnias for the “extra” 30 square meters.
If the area of the apartment is more than 300 square meters, and the house is more than 500, then the amount of tax is increased by 25 thousand hryvnias for each such object (the so-called “luxury tax”).
However, this tax can also be reformed and then everyone will have to pay.
Transport tax
They propose to reduce the tax threshold from 375 minimum wages to 200.
This will mean that from 2021, owners of cars more expensive than 1.2 million hryvnias will be required to pay transport tax annually in the amount of 25 thousand hryvnias.
Interestingly, this will apply not only to new cars, but the law will have the opposite effect. That is, a person who last year bought a car for 1.4 million hryvnias will now also pay a luxury tax.
Which cars will be subject to the new tax?
The innovations are criticized due to the fact that not only luxury cars, but also the upper middle class will fall under the tax.
Every year, before February 1, the Ministry of Economy on its website publishes a list of cars subject to transport tax. Now there are 213 such models. These include the Audi SQ8, BMW X5 M50d, Chevrolet Corvette, Lamborghini Aventador, Mercedes-Benz G63 AMG, Porsche Panamera, and Tesla Model S.
If the bill is passed, then it may apply to such models as BMW X1, Toyota RAV 4, Hundai Santa Fe, etc.
The authors of the bill explain the need to reduce the tax threshold by the fact that fewer cars are subject to this tax. However, the numbers suggest otherwise. Owners of luxury cars paid 97.2 million hryvnia of transport tax to local budgets during January – July this year. Compared to the corresponding period last year, the amount increased by 55.2 million hryvnias, or more than 2.3 times, writes Gazeta ua.
Control over the payment of taxes
They will pay attention to the fact that next year they want to expand the powers of regulatory authorities, for example, in obtaining information regarding bank accounts of taxpayers. In fact, tax authorities will have access to the bank secrets of debtors and, by a court decision, will be able to demand information on the status of accounts, movement of funds, and the like.
Why tax increases
A sharp increase in the minimum wage, infrastructure costs and peak debt payments make it necessary to look for additional budget revenues. According to the 2021 state budget, which has so far been adopted in the first reading, the budget deficit will amount to UAH 270 billion, while revenues will increase by 5.1%.
Where do budget revenues come from? These are mainly taxes. Due to the devaluation of the hryvnia, an increase in the “minimum wage” to which ERUs and other taxes are tied, as well as an increase in tax rates themselves, budget revenues will increase.
