Lina Nemchenko, Partner, Baker & McKenzie
Mariana Marchuk, Counsel, Baker & McKenzie
The changes resulted from the adoption by the Verkhovna Rada of Ukraine, on 2 March 2015, of Law of Ukraine No. 219-VIII"On Amendments to Chapter VIII "Transitional Provisions" of the Law of Ukraine "On Collection and Accounting of the Unified Social Tax" (hereinafter - the "Law"). With the aim of lowering the tax burden on employers and promoting the legalization of payroll the Unified Social Tax (the "UST") is to be reduced by applying a lowering factor.
Under the Law, as of 13 March 2015 employers are entitled to use the lowering factor if the following conditions are satisfied:
- the employee's salary under an employment agreement (contract) or remuneration under a civil law contract for an insured person has increased by 20% over the average salary (remuneration) payable by the company in 2014 (previously the average salary for the company needed to have increased by 30% over the average salary for 2014);
- the average payment for an insured person after applying the factor will be not less than the average salary (remuneration) payable by the company for an insured person in 2014 (previously the average payment for an insured person after applying the factor should have been not less than UAH 700);
- the number of insured persons for the current month does not exceed 200% of the average number of insured persons for 2014.
If all these criteria are satisfied the employer is entitled to calculate the factor by dividing the average salary/remuneration paid in 2014 for one insured person by the average salary/remuneration for the current month of 2015 when the relevant salary/remuneration is accrued.
If after the calculation the factor is less than 0.4 the employer should apply the factor 0.4. As of 1 January 2016, the lowest permissible value of the factor will be 0.6 regardless of the amount of salary/remuneration for which the UST is withheld and remitted.
 See Law of Ukraine No. 219-VIII "On Amendments to Chapter VIII "Transitional Provisions" of the Law of Ukraine "On Collection and Accounting of the Unified Social Tax" dated 2 March 2015.