In Ukraine, citizens have the opportunity to reclaim part of the paid personal income tax (PIT) through the tax deduction mechanism. However, according to the head of the parliamentary committee on finance, tax, and customs policy, Danilo Hetmantsev, only a few actually take advantage of this right.
This is reported by Finway
“Every taxpayer has the right to such a deduction, but only a few use it,” emphasized Hetmantsev.
What is a Tax Deduction and Who Can Obtain It
The tax deduction is regulated by Article 166 of the Tax Code of Ukraine. It includes consideration of expenses for education, housing rent for internally displaced persons, insurance, mortgages, medical treatment, and other expenses. Thus, every official taxpayer can submit a declaration and receive a partial refund of the paid PIT.
From 2019 to 2021, the number of submitted declarations for obtaining a tax deduction increased by 2-4% each year. However, since the full-scale invasion of Russia, this figure has significantly decreased—by almost a third—and has not returned to pre-war levels even in 2024. It is estimated that in 2024, only about 1.1% of all taxpayers and less than 1% of households actually utilized the tax deduction mechanism, which is a very low figure for the entire country.
Why the Tax Deduction Mechanism Is Not Working Effectively
The main reason for the low utilization of the tax deduction is the necessity to have officially confirmed expenses and legal income. To obtain the deduction, a citizen must provide documents confirming the expenses, including receipts, as well as have “white” income that is officially taxed.
Hetmantsev believes that the low level of utilization of this mechanism is a telling example of the negative impact of the shadow economy, which deprives both the state and citizens of additional funds. According to him, the tax deduction could become an effective tool for supporting the population, but abuses and tax evasion complicate this process.
Hetmantsev also urged the State Tax Service to more actively inform citizens about the opportunities for tax deductions and the importance of officially documenting expenses and income to receive this state support.