12:24 06.01.2015

Insurance profit tax introduced in Ukraine from Jan 1, insurance income tax retained

2 min read
Insurance profit tax introduced in Ukraine from Jan 1, insurance income tax retained

Taxation of insurance in Ukraine from January 1, 2015 will amount to an 18% profit tax, and a 3% income tax under agreements on taxable insurance activities.

This is stipulated in the law on amendments to the Tax Code of Ukraine and certain Ukrainian laws on tax reform, which was posted on the website of the state’s official publication Holos Ukrainy.

According to the document, the taxable activities of insurers are calculated as the sum of insurance premiums accrued under personal insurance and social insurance agreements. Insurance premiums under social insurance agreements are included as taxable activities only in the amount of insurers' bonuses foreseen in agreements.

The law retains zero taxation for life insurance agreements, insurance agreements in the nongovernmental pension system, including the additional pension insurance agreements, and introduces zero taxation for voluntary medical insurance agreements.

As for reinsurance, the law foresees that risk insurance agreements outside Ukraine, under which premiums are paid to nonresidents, will receive a 4% tax rate, with the tax being paid by insurers. As for obligatory insurance agreements, under which premiums are paid to non-resident individuals, green card insurance agreements and passenger aviation transportation insurance agreements, no tax will be applied.

No tax will be applied to risk insurance, and reinsurance agreements signed directly with insurers and non-resident reinsurers whose insurance financial strength rating is in line with the requirements of the national commission for financial service markets regulation. In other cases a 12% tax will be applied.

The law also stipulates the definition of voluntary medical insurance agreements as agreements foreseeing payments to healthcare centers if the insured party suffers from a disease or an accident. The agreement is to foresee a minimum term of one year and the return of insurance payments to insured persons if the agreement is cancelled early.

The additional pension insurance agreement was introduced. The agreement foresees a liability of insurers to pay annuity when insured persons reached the pension age, which cannot be lower than the sum defined for general obligatory state pension insurance by more than 10 years.

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