Few people know that every employee is entitled to social tax benefits (hereinafter – PSP). The key in regulating the rules of calculation and receipt of PSP is Art. 169 of the Tax Code of Ukraine. The essence of this benefit is that the latter reduces the amount of total monthly taxation of income received from the employer, namely wages. However, the right to use PSP may not be exercised by all.
PSP is applied to the salary accrued in favor of the taxpayer during the reporting tax month, if the amount of such income does not exceed the amount equal to the subsistence level applicable to able-bodied persons as of January 1 of the current year, multiplied by 1.4 and rounded to the nearest 10 UAH.
Thus, the subsistence level as of January 1, 2020 is determined by para. 4 st. 7 of the Law of Ukraine “On the State Budget of Ukraine for 2020” and is 2102 hryvnia. Therefore, the marginal revenue for the application of PSP in 2020 will be:
2102 UAH x 1.4 = 2940 UAH.
Given that in accordance with Art. 8 of the Law “On the State Budget of Ukraine for 2020” the monthly minimum wage as of January 1 is 4723 UAH, the persons who receive exactly this amount of wages (and the Law sets it as mandatory), will not be able to receive PSP, after all, it can be received only by persons who receive a salary of 2940 hryvnias and less. Exceptions may be situations where a person goes on unpaid leave, on leave to care for a child under 3 years of age and other cases where the employee has not worked a monthly working time.
Therefore, in the vast majority of PSPs, only part-time workers or hourly workers will be able to receive (since such persons are most likely to receive a salary equal to or less than the marginal income for the use of PSP). , but not always.
In addition, the exception to the calculation of marginal income are persons with two or more children. For such persons, the amount of marginal income for receiving PSP to one of the parents is defined as the product of the maximum amount of income for the use of PSP and the corresponding number of children:
2940 UAH x number of children = maximum income for the use of PSP
That is, for employees who have two children, the maximum income for the use of PSP will be 5880 UAH, and for employees who have three children – 8820 UAH, etc.
The size of the total PSP for 2020 reaches 50% of the relevant subsistence level for able-bodied persons:
2102 UAH x 50% = 1051 UAH.
It is important to take into account that the starting point for determining the size of the PSP is also to establish to which category of persons in accordance with Art. 169.1 of the Criminal Code of Ukraine you are.
Thus, for a taxpayer who is a single mother (father), widow (widower) or guardian – per each child under the age of 18 the amount of PSP from personal income tax will be 150%, and therefore the amount of PSP will be:
1051 UAH x 1.5% = 1576.50 UAH x number of children
The maximum amount of income for the use of PSP in this case will be 2940 UAH x the corresponding number of children. And that’s not all. What to do next with such indicators?
Taking into account the requirements of paragraph 164. 6 of the Tax Code of Ukraine, the base of personal income tax in the form of wages is reduced by the amount of PSP:
the amount of monthly wages – PSP = base of personal income tax
Personal income tax in this case will be:
(amount of monthly salary – PSP) x 18% = personal income tax
At the same time, the PSP does not affect the tax base for the military tax, and therefore the latter will cope with the calculation of the amount of monthly wages.
Eventually, as a result, the amount of salary to be paid will be higher than usual.
Thus, determining the possibility of exercising the right to PSP and its calculation is done individually in each case, because, in addition to the subsistence level for able-bodied persons as of January 1 of this year, must also take into account the individual legal status of the person. It is extremely important to be careful when making calculations, because any mistake can result in an incorrect conclusion about the presence / absence of the right to PSP and / or the size of the latter.
For more detailed legal advice, legal support for the registration of social tax benefits for personal income tax, as well as other tax benefits provided by tax law for individuals, you can contact the lawyers of the Law Firm “Neofelis Lo Group” for the following contact details.
We will always be happy to help you!
Phone: + 38 (050) -471-77-71 (Telegram, Viber, WhatsApp)
Email: neofelis.lg@gmail.com