Minimum Tax Obligation (MTO) 2025: New Rules for Ukraine’s Farmers

Since the beginning of 2025, Ukrainian farmers have been dealing with changes that significantly affect their operations. Amendments to the tax legislation, adopted by Law No. 4015-IX, establish a new procedure for calculating the Minimum Tax Obligation (MTO) for agricultural land. This fiscal instrument aims to increase budget revenues and combat the shadow use of land. But is it fair and effective in today’s conditions?

The Minimum Tax Obligation is the amount of tax that owners or users of agricultural land must pay, regardless of whether the land is used or generates income. In 2025, the Minimum Tax Obligation (MTO) will be calculated based on an increased coefficient of 0.057, but it will need to be paid in 2026. This is due to the specifics of tax legislation, according to which land taxes are paid in the year following their assessment.

Thus, in 2025, landowners and users will pay the Minimum Tax Obligation (MTO) assessed for the 2024 reporting year.

Since the coefficient used to calculate the MTO in 2024 was 0.05 (5% of the normative monetary valuation (NMV)), in 2025, taxes will be paid at this specific rate.

For example, if the NMV of a land plot was 10,000 UAH, the Minimum Tax Obligation assessed for 2024 would be calculated as follows:MTO = NMV × Coefficient = 10,000 × 0.05 = 500 UAH per hectare

This amount will be included in the tax notice that landowners will receive in 2025 and must be paid within the deadlines set by law (usually within 60 days of receiving the notice).

At the same time, farmers must consider another important change—the increase in the military levy rate. From December 1, 2024, the military levy was increased from 1.5% to 5%. This means the total tax liability will grow, while the amount of the Minimum Tax Obligation (MTO) payment may decrease. This is because the MTO is determined as the difference between the total sum of taxes (Personal Income Tax (PIT) and the military levy) and the taxes actually paid for land use. Since the higher military levy rate increases the total tax amount, the delta between the taxes actually paid and the MTO may be smaller.

The main goal of these changes is to stimulate the rational use of land resources and ensure revenues for the state budget, which is currently in critical need of funds to finance defense and social programs. Lawmakers also aim to bring the agricultural sector out of the shadow economy by compelling landowners to officially account for their assets. However, these steps have sparked controversy among farmers.

For small agricultural enterprises, these changes can become a significant challenge. High tax obligations are unfair for those who are unable to cultivate their land effectively due to military actions or limited resources. Even in peacetime, many agricultural companies struggled to cover the costs of maintaining their land, and now additional taxes create even greater pressure.

Furthermore, the MTO does not take regional specifics into account. In some regions, the land may be less fertile or located in combat zones where its use is impossible. This puts farmers from such regions on an unequal footing compared to others.

However, despite the challenges, the MTO also has its advantages: it helps reduce speculation with land plots, encourages leasing land to those who can use it effectively, and ensures transparency in land relations. Owners who do not want to cultivate the land themselves can lease it out, transferring the tax obligations to the lessee.

At the same time, the state must provide support mechanisms for those who have suffered from military actions or have limited farming capabilities. A balance between fiscal goals and support for farmers is critically important for maintaining the stability of the agricultural sector, which is the foundation of the Ukrainian economy.

In summary, in 2025, farmers will pay the Minimum Tax Obligation for 2024, calculated at a rate of 5% of the land’s normative monetary valuation. In 2026, they will have to pay for the 2025 reporting year with the increased coefficient of 5.7%, which will increase the tax amount. This requires careful financial planning to avoid being overburdened by rising tax liabilities. In turn, farmers need to adapt to the new realities and manage their resources more effectively to remain competitive in the market.

Specially for Latifundist