Starting from 2025, the rules for paying military duty (MD) in Ukraine have undergone significant changes: the rate has increased, the list of payers has expanded, and the tax base has changed. The list of taxpayers now also includes individual entrepreneurs on the simplified taxation system. By 22 May, they are obliged to pay the ECT based on the results of their business activities in the first quarter of 2025. So let's find out who, when and in what amount has to pay the military tax. We will also look at the consequences of the innovations for businesses.


New rules for military duty: who will pay how much and what will be affected

How have the rules for paying the military fee changed in 2025?

    According to the Laws of Ukraine No. 4015-IX dated 10.10.2024 (On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Ensuring the Balance of Budget Revenues during the Period of Martial Law) and No. 4113-IX dated 04.12.2024 (On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Stimulating the Development of the Digital Economy in Ukraine), the payers of the military tax are now individuals and legal entities, as well as individual entrepreneurs:

  • Employers (tax agents) must pay 5% military duty (+18% personal income tax) simultaneously with the transfer of funds to the accounts of individuals. If the income is accrued but not paid, the fee is paid within 30 calendar days after accrual.
  • Group I, II, and IV sole proprietors pay 10% of the minimum wage monthly by the 20th day of the month, or you can pay for the entire year in advance. Group III sole proprietors – 1% of the income received, payable within ten calendar days after filing a tax return for the quarter (the first payment in 2025 is due by 20 May).
  • Individuals who declare their income on their own must pay 1.5% of their declared income for 2024 and 5% of their income received from 01.12.2024. This includes income from property transactions (lease, exchange, sale), as well as the value of inherited or donated property. Tax returns, financial statements and the payment of CPT are due within the timeframe established for personal income tax (by 1 August of the year following the reporting year).
  • The following are exempt from taxation:
  • Military personnel, employees of law enforcement agencies and security forces during participation in hostilities.
  • Individual entrepreneurs and LLCs whose tax addresses are located in the territory of hostilities or temporarily occupied territories.
  • Self-employed persons called up for military service during mobilisation.

 

   Also not taxed are:

  • maternity payments;
  • housing subsidies;
  • alimony;
  • business trip payments;
  • gifts, the value of which does not exceed 25% of the minimum wage, or the donor is a close relative.

 

How to pay the military fee

  For individuals, it’s simple: the tax is automatically withheld by the employer when paying salaries or other income. However, if you have received income that is not subject to mandatory withholding (for example, from the sale of property), you must file a tax return and pay the fee yourself.

New rules for military duty: who will pay how much and what will be affected

The reporting of individual entrepreneurs and LLCs, as well as the payment rules, have undergone some changes. Individual entrepreneurs and self-employed persons must calculate the amount of military tax on their declared income and file a military tax return. And then pay it to the budget using the taxpayer’s account, through banking institutions or online services.

 

 

 

If you have any difficulties filling out the declaration, it is better to seek advice from an accounting service provider.

   The State Tax Service has created separate accounts for the convenience of crediting funds. You can find details for each region on the official STS portal.

 

What are the consequences of the new rules

   The first and most significant consequence is an increase in the fund for increasing the state’s defence capability. Currently, the tax is an important source of funding for the Ukrainian army. It was introduced back in 2014 at 1.5%, and now it has been increased, but the tax will be cancelled after the end of martial law (from 1 January of the year following the year of its completion).

   The second consequence is the need for businesses to seek tax advice in connection with the new rates and to reallocate their budgets. The format of tax reporting has been updated. For example, to maintain financial stability under the new conditions, you can:

  • Review labour costs. Perhaps optimise the number of employees or transfer some of them to project work, outsource accounting or use legal support for accounting by external specialists.
  • Optimise business processes. Reducing administrative costs can partially offset tax increases.
  • Consider tax planning. Some businesses may find it advisable to switch to a different taxation system or take advantage of tax benefits. You can find out the right mechanisms for this during a tax consultation with CeDePe specialists.

 

   Accounting experts will help you find the best ways to adjust your financial balance under the new conditions. Qualified accountants will conduct a detailed audit of the company’s financial statements to determine where there are opportunities to optimise tax reporting, provide accounting support to establish a payment system under the updated conditions. They will also help calculate new tax burdens, predict their impact on the company’s budget and develop strategies to reduce tax pressure.