Is the income earned by an individual entrepreneur on the general taxation system from business activities subject to military tax?

The tax service in the Odessa region clarifies whether the income received by an individual entrepreneur (IE) under the general taxation system from business activities is subject to military tax.

It is noted that paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the Tax Code of Ukraine dated December 2, 2010, No. 2755-VI (hereinafter - TCU) temporarily establishes a military tax until the resolution of the Verkhovna Rada of Ukraine on the completion of the reform of the Armed Forces of Ukraine comes into effect.

Taxpayers of the military tax include individuals defined in paragraph 162.1 of Article 162 of the TCU (subparagraph 1 of subparagraph 1.1 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the TCU), specifically:

an individual resident who receives income from sources in Ukraine as well as foreign income;

an individual non-resident who receives income from sources in Ukraine;

a tax agent.

At the same time, subparagraph 1 of subparagraph 1.2 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the TCU establishes that the object of taxation with the military tax for the taxpayers mentioned in subparagraph 1 of subparagraph 1.1 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the TCU includes income defined in Article 163 of the TCU, specifically, total monthly (annual) taxable income; income from sources in Ukraine that are finally taxed at the time of their accrual (payment, provision); foreign income – income (profit) obtained from sources outside Ukraine.

According to subparagraph 164.1.3 of paragraph 164.1 of Article 164 of the TCU, total annual taxable income is equal to the sum of total monthly taxable incomes, foreign incomes received during such reporting tax year, incomes received by an individual entrepreneur from conducting business activities according to Article 177 of the TCU, and incomes received by an individual who conducts independent professional activities according to Article 178 of the TCU.

The calculation, withholding, and payment (transfer) of military tax from the incomes of taxpayers indicated in subparagraph 1 of subparagraph 1.1 of paragraph 16 of subparagraph 1 of subsection 10 of section XX of the TCU are carried out in accordance with the procedure established by section IV of the TCU, considering the specifics defined in subsection 1 of section XX "Transitional Provisions," at the rate determined by subparagraph 1 of subparagraph 1.3 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the TCU (subparagraph 1.4 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the TCU).

For taxpayers mentioned in subparagraph 1 of subparagraph 1.1 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions," the military tax rate is 5 percent of the taxable object defined in subparagraph 1 of subparagraph 1.2 of paragraph 16 of subparagraph 1 of subsection 10 of section XX "Transitional Provisions" of the TCU (subparagraph 1.1 of subparagraph 1.3 of paragraph 16 of subparagraph 1 of subsection 10 of section XX of the TCU).

Thus, the income received by an individual entrepreneur under the general taxation system from business activities is subject to military tax in accordance with the provisions of Article 177 of the TCU.

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