Научно-методический журнал спецвыпуск №1 2021

Stage VI
(2004—2010) — the adoption of the Tax Code 
of Ukraine, which completely changed the mechanism of 
taxation of the insurance system. Insurance companies 
paid a tax of 3 % on the amount of insurance premiums 
(reduced by the amount of payments under reinsurance 
contracts) received by resident insurers under the contract 
of insurance, co-insurance, and reinsurance of risks. 
Another feature is that insurance companies calculated the 
amount of income tax without paying it to the budget.
From the beginning of 2004, further proposals for tax 
changes in insurance began to be actively developed by 
both the government and the Verkhovna Rada of Ukraine. 
Draft low № 4000-1 proposed to prohibit the reduction 
of the tax base on the amount of reinsurance payments if 
they are made in favor of non-resident reinsurers, which 
received a positive response in the vote, but ultimately 
the President vetoed it. On February 4, 2004, the Cabinet 
of Ministers of Ukraine issued Resolution [3], which 
gave Ukrainian insurance companies the right to enter 
into reinsurance agreements only with those reinsurers 
that were registered in countries with the current state 
supervisors of insurance activities [4].
On February 9, 2004, the Decree of the President of 
Ukraine (№ 175) was issued, according to which the State 
Commission for Regulation of Financial Services Markets of 
Ukraine was instructed to prepare and submit proposals by 
April 1, 2004 to prevent the use of the insurance system for 
tax evasion, dilution of enterprise assets, money laundering 
and their export.
In May 2004, the State Commission for Regulation of 
Financial Services Markets of Ukraine took the initiative 
to prepare amendments to the legislation of Ukraine 
„on the transition to taxation of income from insurance 
activities”.
Statistically, the sixth stage of development of tax 
regulation of the insurance system is shown in table 
through such indicators as the amount of income tax 
paid by insurance companies, their number and income, 
as well as the level of tax returns is calculated. During the 
analyzed period, all indicators were moving in increasing 
order, not only the number of insurance companies in 
Ukraine increased, but also their incomes almost doubled. 
Accordingly, the amount of taxes paid tripled from UAH 
186 million in 2004 to UAH 500.8 million in 2010. Of course, 
with increasing revenues and taxes paid, the level of tax 
returns also increased annually. The significance of the tax 
returns lies in the fact that this category, with an effective 
state tax policy, provides stable and sufficient revenues to 
the State Budget of Ukraine, creates incentives for active 
insurance activities, and thus the development of the 
insurance system as a whole.

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СПЕЦВЫПУСК № 1/2021
99
Stage VII
(2011—2012) — following the provisions of 
the adopted Tax Code for the subjects of the insurance 
system provides for a transitional tax procedure. The 
Tax Code of Ukraine makes the following changes in the 
taxation of insurance companies:
•
the object of the insurer taxation is the profit from 
the implementation of its activities;
•
the basic tax rate is 16 % with the introduction of the 
following transitional provisions in time;
•
from April 1, 2011 to December 31 inclusive — 23 %;
•
from January 1, 2012 to December 31 inclusive — 21 %;
•
from January 1, 2013 to December 31 inclusive — 19 %;
•
from January 1, 2014 — 16 %.
At this stage of development, changes were made to 
the conditions of taxation of various types of insurance 
activities. Profit from insurance activities for long-term 
life insurance (as well as before the adoption of the 
Tax Code of Ukraine) under the new rules are not taxed. 
However, the conditions have changed, which provide for 
the classification of life insurance as long-term. If before 
the adoption of the Tax Code the long-term period was 
considered to be 10 years or more, then after its adoption 
it was halved [7]. That is, long-term life insurance includes 
all contracts concluded with the insurer for five years or 
more. Restrictions on enterprises and other legal entities 
to include insurance payments for their business activities 
at their own gross expense have been lifted.
Under the new rules, contracts for compulsory 
insurance under the international Green Card system, 
as well as civil liability insurance of a nuclear installation 
operator for damage that may be caused by a nuclear 
incident, are not taxed.
Agreements with non-resident reinsurers whose 
financial reliability rating meets the requirements 
established by a specially authorized executive agancy in 
the field of regulation of financial services markets are not 
taxed. In other cases, for example, with reinsurance that do 
not have the appropriate rating, taxation is carried out at 
the rate of 12% of the amount of such payments at own 
account at the time of their transfer.
A new clause has been introduced, according to which 
insurance of risks outside Ukraine, which is carried out 
for the benefit of non-residents (except for „Green Card” 
policies) is taxed at a rate of 4 % of the reinsured amount at 
the insurer’s own account.
The procedure of taxation of income from premiums 
under long-term life insurance and pension insurance 
contracts has not been determined for the transitional 
period, therefore the provisions of § 156.2.1, § 156.2 art. 
156 of Section III of the Tax Code on the procedure for 
taxation of income from insurance activities for long-
term life insurance and pension insurance at a rate of 0 % 
subject to the requirements of the term „long-term life 
insurance contract” provided in the glossary of Section I 
of the Tax Code.
About financial and other activities of the insurer, not 
related to insurance, for the transitional period when 
calculating the object of taxation, the profit from such 
activities was determined by reducing the amount of 
income for the reporting period (financial and investment 
income, other operating income, income from securities 
transactions, derivatives and other than securities, 
corporate rights and other income) in the amount of 
expenses of the reporting tax period not directly related to 
insurance or distributed in proportion to the share of the 
above income in the total insurer income (administrative 
expenses, other operating losses, financial costs, other 
operating expenses). At the same time, the existing 
mechanism of transition from the significant value of the 
object of taxation for future periods to full reconciliation 
of losses by including these losses in the expenses of 
the first quarter of the next tax year (for the transitional 
period — the inclusion of losses in the first quarter of 2011 
to the second calendar quarter of 2011). By the way, since 
the Tax Code does not allocate the amount of depreciation 
deductions in determining the object of taxation, such an 
amount in the tax accounting of the insurer was included 
in administrative expenses, taking into account the 
standard distribution similar to non-insurance expenses.
Studies of insurance activities taxation show that the Tax 
Code of Ukraine, which came into force on January 1, 2011, 
did not change the conditions of taxation of insurance 
activities [8, p. 59]. Insurers continued to pay income tax 
on insurance activities by the mechanism laid down in 
the Law of Ukraine „On Corporate Income Tax” which is 
officially invalid.