Taxes for investors may be reduced to 5%: the Rada proposes alternative incentives for investments in Ukrainian business

An alternative bill No. 15314-1 has been registered in the Verkhovna Rada, which proposes to stimulate citizens' investments in the Ukrainian capital market not by creating new investment accounts, but through tax incentives.

The relevant changes are explained by the fact that today the Ukrainian stock market has low retail investor activity. One of the reasons is the insufficient attractiveness of financial instruments compared to other ways of saving money.

The proposed changes aim to make investments in Ukrainian corporate bonds and collective investment institutions more competitive through softer taxation.

The bill was developed as an alternative to bill No. 15314.

As previously reported by the "Judicial and Legal Newspaper", the main bill No. 15314 provides for:

• the introduction of personal investment accounts, which investment firms will open to account for individuals' funds and carry out investment activities;
• establishing that the term of such an account is not limited, and it can be replenished up to 10,000 euros per month (in hryvnia equivalent at the NBU exchange rate as of January 1 of the respective year);
• introduction of a special tax regime under which income from investing through a personal investment account (profit from securities transactions, dividends, interest, etc.) will not be taxed provided that the funds remain in the account for at least 1,095 calendar days;
• establishing the obligation of investment firms to notify tax authorities about the opening and closing of personal investment accounts, as well as to report annually on transactions;
• defining the rules for the functioning of personal investment accounts, including the possibility of opening only one such account per person, the procedure for early closure, changing the investment firm, and other safeguards to protect investors and prevent abuse.

If the main document proposes to introduce the mechanism of personal investment accounts and requires comprehensive changes to capital market legislation, the alternative option focuses on changing tax rules.

What tax benefits does the alternative bill propose

Bill No. 15314-1 proposes comprehensive changes to the Tax Code of Ukraine regarding the taxation of investment income, dividends, and investment profit, as well as clarifying certain income declaration rules.

In particular, subparagraph 165.1.18 of article 165 is amended. Dividends paid to a taxpayer in the form of shares, units, or investment certificates issued by a resident are not taxed, provided that such accrual does not change shareholders' shares in the authorized capital and leads to its increase by the amount of accrued dividends. This exemption also applies if the issuer conducted a public placement of securities and has at least 1,000 investors.

Tax rates on passive income are also changed. The base rate remains 18%, but for certain incomes a 5% rate is established — in particular for dividends on shares and corporate rights, income on corporate bonds, as well as investment income on publicly placed securities of collective investment institutions, subject to compliance with requirements regarding the number of investors and ownership structure.

It is established that the 5% rate applies to income in the form of dividends on securities of collective investment institutions placed by public offering, as well as corporate bonds under similar conditions regarding the number of investors and ownership share.

A half-rate of the base rate defined in paragraph 167.1 is also provided for income in the form of dividends accrued by non-residents, collective investment institutions, and other entities that are not profit taxpayers, except for certain specified cases.

Additionally, a 5% rate is introduced for investment profit from transactions with securities placed by public offering, including corporate bonds of Ukrainian issuers and securities of collective investment institutions.

Moreover, taxpayers are planned to be exempted from the obligation to file an annual declaration if during the year they received investment profit exclusively through a professional securities trader who has already performed the functions of a tax agent. Thus, investors will not have to duplicate information in their own reporting.

If the bill is adopted, the approved changes are to come into legal force from January 1, 2027.

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