There are cases when the employee resigns from the companyon his/her own accord. Redundancy payment in case of dismissal of an employee is a monetary compensation for the loss of work guaranteed by labor legislation. How such benefits should be taxed – in the following.
PIT
Redundancy payment is included in the total monthly (annual) taxable income of the taxpayer and taxed on personal income tax (hereinafter − PIT) at a rate of 18% (para. 164.1, paras. 164.2.20 of the Tax Code of Ukraine; hereinafter – TCU).
Tax social benefit
At the same time, the tax social benefit is not applied to the amount of the redundancy payment, since such payment does not apply to the wage fund (para. 169.2.1 of TCU). In the Tax calculation of the amounts of income accrued (paid) for the benefit of individuals and the amount of tax deducted from them (form No. 1DF), the redundancy payment is reflected with a sign 127 in accordance with the Guide of revenues items of individuals (Annex to the Procedure for filling in and submitting by tax agents of the Tax calculation of amounts of income accrued (paid) for the benefit of individuals, and amounts of tax deducted from them, approved by the order of the Ministry of Finance of Ukraine dated January 13, 2015, No. 4).
War tax
Since the redundancy payment is included in the total monthly (annual) taxable income, the war tax is also deducted at the rate of 1.5% (sub-para. 1.2 of para. 161 of sub-sec. 10 of sec. XX of TCU).
USC
The basis for the calculation of the unified social contribution (hereinafter − USC) for companies employing the labor of individuals under the terms of an employment agreement (contract) or under other conditions stipulated by law, is the sum of the salary accrued to each insured person by types of payments, which include the basic and additional wages, other incentive and compensatory payments, including in kind, which are established in accordance with the Law of Ukraine “On labor remuneration” dated March 24, 1995, No. 108/95- ВР.
Determination of types of payments related to the basic, additional wages and other incentive and compensatory payments, during the calculation of USC provided by the Regulations on wage statistics, approved by the order of the State Statistics Committee of Ukraine of 13.01.2004, No. 5 (hereinafter − Regulations No. 5).
Para. 3.8 of sec. 3 of the Regulations No. 5 stipulates that the amount of the redundancy payment in case of termination of an employment contract is included in other payments not belonging to the wage fund.
Consequently, the amount of the redundancy payment accrued by the employer to the employee in the event of his/her dismissal is not the basis for the USC accruing.
