If the tax basis (to compute pensions), in a calendar month, exceeds ten minimum salaries, the rate of 20% is applied to the excess amount.

Tax officers in the Holosiiv district of Kyiv city inform that according to par. 164.2.19 and par. 164.2, article 164 of the Tax Code of Ukraine, the total (annual) taxable income obtained monthly includes, in particular, pensions (inclusive of wage-indexed amounts accrued in line with the legislation) or life-long allowance paid monthly to the taxpayer from the Pension Fund of Ukraine or government budget according to the law, provided that their amount exceeds three minimum wages (for a month) set as of January 1 of the accounting year, what is applicable to the excess amount, and pensions payments remitted from abroad, if according to the international contracts the obligatory nature of payments is approved by the Verkhovna Rada of Ukraine, depending on whether pensions are taxable or not in the country paying a pension.

The tax rate of 15% as regards the income tax basis, in particular, is applicable to the accrued (paid out, given) pensions, if a monthly taxable income exceeds three minimum wages, set as of January 1 of the accounting year. If according to the tax basis (pension), in a particular calendar month, the pension exceeds ten minimum wages, the rate of 20% is applicable to the excess amount.

Significantly, starting January 1, 2015, according to article 8 of Law of Ukraine On Government Budget for 2015, dd. 28.12.2014, under No.80-VІІІ, the minimum wage for people able to work amounts to 1 218.00 hryvnias a month.

Thus, starting January 1, 2015, tax agents preparing tax returns for the pension exceeding 3 654.00 hryvnias (minimum wage of 1 218.00 hryvnias х 3) and amounting to 12 800.00 hryvnias (minimum wage of 1 218.00 hryvnias х 10), are liable to charge the tax levied on individual income at a rate of 15. If the pension exceeds 12 800.00 hryvnias, the excess amount is taxed at a rate of 20%. For example:

Example 1 (calculated at a rate of 15%). The pension of a retiree equals 13 000.00 hryvnias, the individual income tax charged is 1 401.9 hryvnias, i.e.:

(13 000.00 hryvnias - 3 654.00 hryvnias = 9 346.00 hryvnias х 15%).

Example 2 (calculated at a rate of 15% and 20%, simultaneously). The pension of a retiree equals 18 000.00 hryvnias, the individual income tax charged is 2 260.2 hryvnias (18 000.00 hryvnias - 3 654.00 hryvnias = 14 346.00 hryvnias; (14 346.00 hryvnias - 12 180.00 hryvnias) х 20.0% = 433.20 hryvnias; 12 180.00 hryvnias х 15% = 1 827.00 hryvnias).