US Expat Guide to Ukraine Taxes: Everything You Need to Know
- Living as an Expat in Ukraine
- Ukraine at a Glance
- US Expat Taxes in Ukraine
- Who Has to File Taxes in Ukraine?
- Who Qualifies as a Tax Resident in Ukraine?
- Income Tax in Ukraine
- Other Tax Situations in Ukraine
- Do the US and Ukraine have a Tax Treaty?
- Does Ukraine Have a Totalization Agreement with the US?
- What Tax Forms do US expats in Ukraine Need to File?
- Navigating Tax Compliance for US Expats in Ukraine
Living as an Expat in Ukraine
It’s estimated that between 20,000 to 30,000 Americans live in Ukraine, an eastern European country home to more than 43 million residents. If you’re one of the many Americans living abroad in this country, you should know how Ukraine’s taxes for US expats are handled.
Understanding your tax requirements while living overseas can help ensure you remain tax compliant in Ukraine and the United States.
Ukraine at a Glance
- Primary Tax Forms: Personal Income Tax Return (PIT).
- Tax Year: January 1st to December 31st.
- Tax Deadline: April 30
- Currency: Ukraine hryvnia (UAH)
- Population: over 43 million
- Number of US Expats in Ukraine: Approx. 20,000 – 30,000
- Capital City: Kyiv
- Primary Language: Ukrainian
- Tax Treaty: Yes
- Totalization Agreement: No
US Expat Taxes in Ukraine
Whenever Americans live abroad, they’re responsible for paying taxes in both the US and the country where they live — in this case, Ukraine. Luckily, Ukraine and the US have a tax treaty in place, which prevents US expats from paying taxes to both countries on the same income. This helps avoid double taxation, even though US expats will still have a tax liability in each country.
The US also has a few tax breaks Americans living in Ukraine can take advantage of to further lower their tax bills. Below, we’ll walk you through everything you need to know about taxes for foreigners in Ukraine.
Who Has to File Taxes in Ukraine?
Residents and non-residents living in Ukraine must pay income tax. However, you may not have to file a tax return. If your only income comes from an employer that withholds taxes from your paycheck, you are not required to file a tax return. However, if you earn self-employment income, run your own business, or work for an employer that does not withhold taxes, you must file a tax return in Ukraine.
Residents and non-residents also owe taxes on different types of income. While residents must pay Ukraine income tax on all income earned — both in Ukraine and foreign — non-residents are only required to pay taxes on their Ukraine-sourced income.
Who Qualifies as a Tax Resident in Ukraine?
If you’re a resident of Ukraine, you’ll owe tax on both Ukrainian and foreign income. However, non-residents are only on the hook to pay tax on income earned in Ukraine. Non-residents are not taxed on their foreign-earned income.
Ukraine Resident Qualifications
You’re considered a resident of Ukraine if you have a permanent residence in the country. Even if you have a permanent residence elsewhere — like the US — as long as you have a permanent abode in Ukraine, you’re taxed as a resident.
In addition, Ukraine also adheres to the 183 days residency test. You’re considered a permanent resident if you live in Ukraine for 183 days or more throughout a calendar year.
Those who are self-employed or freelancers who have registered with the Ukrainian government are also considered residents.
Non-resident Qualifications in Ukraine
If you do not meet any of the above criteria, you’re typically considered a non-resident of Ukraine. So, if you lived in the country for less than 183 days in a calendar year, you might owe taxes as a non-resident.
There’s one important caveat — if the country cannot determine if you’re a resident or non-resident, you’ll be considered a resident and on the hook for both domestic and foreign income tax.
Income Tax in Ukraine
The good news is that it’s even easier to calculate your income taxes in Ukraine than in the US. That’s because Ukraine has a flat income tax rate for residents and non-residents.
For 2022 income, residents and non-residents must pay a flat rate of 18% in income tax. An additional temporary 1.5% military tax is also applied, which means you’ll pay 19.5% in income tax total.
Other Tax Situations in Ukraine
Self-employment workers should register with the Ukrainian government. Once registered, you’ll pay a 5% tax on your profit in addition to the regular income tax rate.
The standard corporate tax rate in Ukraine is 18%.
Value-added Tax (VAT)
Consumers in Ukraine are responsible for paying value-added tax (VAT) when buying goods or services. This is akin to US sales tax.
There are four levels of VAT tax in Ukraine, ranging from 0% to 20%.
Most transactions receive a 20% VAT. Certain imports and agricultural supplies receive a reduced 14% VAT. Certain imported medicines, medical goods, medical equipment, cultural services, flights, and creative industries have an even more reduced 7% VAT. A few select imports and exports do not have VAT applied.
There is no wealth tax in Ukraine.
Technically there is no gift or inheritance tax in Ukraine. However, if income is gifted or inherited, you’ll pay 0% if it comes from a member of your immediate family. This rate jumps to 5% if it’s from a non-family member who is a Ukraine resident. You’ll pay 18% if the income comes from a non-resident.
There is RET (real estate tax) in Ukraine, but the exact rates vary depending on the size of the property. Both residents and non-residents may have to pay RET. Local governments determine the exact real estate tax you’ll pay.
In Ukraine, employers pay social security tax, but employees generally do not. Currently, employees pay 22% of their employees’ salary in social security contributions.
Do the US and Ukraine have a Tax Treaty?
Yes, Ukraine and the US do have a tax treaty in place. This protects US expats in Ukraine from paying double taxes on the same income.
Under the treaty, US citizens and residents living in Ukraine can claim foreign tax credits on their US tax returns for taxes paid to Ukraine. This can help reduce their US tax liability and prevent double taxation.
The treaty also provides rules for determining residency status and taxable income, which can be helpful for expats who are unsure about their tax obligations in Ukraine. Additionally, the treaty provides exemptions for certain types of income, such as pensions, social security benefits, and certain scholarships, which can further reduce the tax burden for expats.
Does Ukraine Have a Totalization Agreement with the US?
While Ukraine has a tax treaty with the US, the two countries do not currently have a totalization agreement. A totalization agreement can help prevent expats from paying into Social Security systems in both countries — saving them from paying double contributions on the same income.
However, since employees do not pay into social security in Ukraine, you’re unlikely to pay social security contributions to both countries on the same income.
What Tax Forms do US expats in Ukraine Need to File?
You typically do not have to file an income tax return in Ukraine if your only income comes from an employer that withholds taxes.
However, Americans living abroad in Ukraine might need to file taxes with the Ukrainian government if they are self-employed, own their own business, or work for an employer that does not withhold taxes.
In this case, you would file a personal income tax return with the Ukraine tax authority. Like the US, the Ukrainian tax year runs from January 1 to December 31. Income taxes are due on April 30.
Furthermore, the main US tax forms that US expats residing in Ukraine need to complete include Form 1040 and Form 2555, among other forms.
Form 1040 is the standard tax form for US citizens and residents, which must be filed by US expats irrespective of their country of residence. Form 2555 is specifically designed to claim the foreign earned income exclusion, allowing expats to exclude a portion of their income earned overseas from US taxes.
Navigating Tax Compliance for US Expats in Ukraine
Thanks for reading our guide on taxes for US expats living in Ukraine. We hope this guide answered your questions and helped you understand your tax liability while overseas. But if you still have questions, get in touch with Greenback Expat Tax Services.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.