On December 1, 2024, Law № 4015-IX "On amendments to the Tax Code of Ukraine and other laws of Ukraine to ensure balanced budget revenues during martial law" came into force, which envisages an increase in the military tax on individual income from the current 1.5% to 5%. These changes apply to all types of income subject to the military tax, including salaries, bonuses, deposits, and other payments.
For bank deposits, the new rate begins to apply on December 1, 2024, so in December we will receive our deposit interest in a new way. To better assess the impact of these changes and plan future finances, this article calculates how the new taxation rate on personal deposits will affect the final returns for depositors.
What deposit tax is in effect now?
Starting from December 1, 2024, income from deposits is taxed at a rate of 18% personal income tax (PIT), which remains unchanged, and 5% military tax. This amounts to a total tax rate of 23%. Prior to December 1, 2024, the military tax was levied at a rate of 1.5%, resulting in a total tax rate of 19.5%.
Calculating income and tax on deposits
Let’s find out how the new tax on deposits will affect depositors’ earnings using an example of placing 100,000 UAH for a 12-month term at 15% annual interest.
With a 5% military tax from 01.12.2024
- Accrued interest: 100,000 x 15% = 15,000 UAH
- Deposit tax: 15,000 x 23% = 3,450 UAH
- Paid income: 15,000 – 3,450 = 11,550 UAH
With a 1.5% military tax until 01.12.2024 Н3
- Accrued interest: 100,000 x 15% = 15,000 UAH
- Deposit tax: 15,000 x 19.5% = 2,925 UAH
- Paid income: 15,000 – 2,925 = 12,075 UAH
Thus, after the military tax increase, you will pay 525 UAH more in deposit taxes annually on the accrued interest of 100,000 UAH, which amounts to an additional 44 UAH per month.
For more details on how interest is accrued and paid on deposits, read our article How to calculate the profit from the deposit?
Impact of inflation on real income
At an annual deposit rate of 15% in UAH, the real interest rate after deposit tax and before the military tax increase was 12.08%. After the changes, it is now 11.55%. Meanwhile, the inflation rate in Ukraine for 2024 is projected to reach 9.7%, according to the latest inflation report by the National Bank of Ukraine, and is expected to slow to 6.9% in 2025.
Therefore, even with the increased military tax, a 15% annual deposit still provides real income growth. This means that depositors not only protect their funds from depreciation but also increase them.
Who pays the deposit tax?
When you open a deposit in a bank, the tax payment process takes place without your involvement. The bank, acting as a tax agent, withholds the taxes and transfers them to the budget. Your personal data is not disclosed or passed on to tax authorities. This approach simplifies the process for the depositor: you receive the net income after all tax obligations are paid, without needing to worry about additional calculations or actions.
What was the deposit tax rate in the past?
Until 2014, there was no deposit tax in Ukraine, ensuring higher profits for depositors. For example, a person who opened a deposit of 100,000 UAH at a 15% annual rate would receive the full 15,000 UAH in profit. However, on April 1, 2014, a 15% deposit tax was introduced, reducing the depositor's earnings to 12,750 UAH.
In January 2015, the personal deposit taxation system underwent further changes: the tax rate increased to 20%. Simultaneously, a military tax of 1.5% was introduced, with the funds directed to support the Armed Forces of Ukraine. As a result, the total deposit tax rose to 21.5%, leaving only 78.5% of the declared interest rate as actual profit.
In 2016, the tax rate on deposit income was reduced to 18%, while the military tax remained unchanged.
Why was the military tax increased?
The increase in the military tax to 5% aims to fund the country’s defense needs. The funds generated from this tax are directed to support the Armed Forces of Ukraine, which plays a vital role in ensuring our victory.
While the increased deposit taxation may seem significant for depositors, as shown in the calculations, the real changes in accrued income will be minimal. Deposits remain a reliable and affordable tool for protecting funds from inflation and earning real income, while tax contributions play an important role in maintaining the state’s financial stability and defense capability.
