From the perspective of Ukraine’s State Tax Service (STS), seafarers represent an exceptionally attractive category of taxpayers. With their steady foreign income, the authority regularly attempts to compel Ukrainian seafarers working under foreign flags to “repay their debt” to the homeland rather than to the flag state. Can Ukraine actually make its seafarers pay income tax at home? A consulting lawyer, who wished to remain anonymous, shared his expert opinion with The Maritime Telegraph.
How much does a seafarer owe the State?
Under Ukraine’s Tax Code, all citizens, including seafarers, are required to declare their income, including wages earned abroad. Income is subject to the standard personal income tax (PIT) rate of 18%, plus a 1.5% military levy. In total, Ukrainian seafarers are theoretically expected to pay 19.5% of their earnings into the national budget.
Each year, citizens must submit a tax declaration to their local tax office by May 1, and any due taxes must be paid by August 1.
However, most seafarers receive “net” salaries, meaning their income already includes tax deductions made by their employers, typically foreign shipowners. In most cases, those companies pay income tax for their crew members in the flag state. Double taxation (paying income tax both in the flag state and in the country of citizenship) is not required under Ukrainian law.
Avoiding double taxation
To prevent double taxation, Ukraine has ratified tax treaties with more than 70 countries. The conditions differ from one country to another. For example:
– In Cyprus, the U.S., Turkey, Canada, and Kuwait, taxes are paid in the employee’s country of citizenship.
– In China, Russia, the UAE, and Israel, the tax is paid in the employer’s country of residence.
– In Greece, Korea, and the U.K., taxation depends on where the ship operator’s enterprise is based.
If Ukraine has a double taxation agreement with the flag state, any taxes paid abroad are credited toward the sailor’s Ukrainian tax obligation. If not, the sailor would theoretically have to pay again at home.
For those who want to pay taxes in Ukraine, for example, to qualify for future pension benefits, it’s possible to request an official certificate from the shipowner confirming the amount of tax paid abroad. After legalizing and translating this document, the seafarer can submit it to the Ukrainian tax office. Any shortfall must be paid, though overpaid amounts are not refunded. In such cases, pension contributions would also be deducted going forward.
Can the State force seafarers or shipowners to pay?
“The shipowner – absolutely not,” says our legal expert. “A foreign shipowner pays taxes in the country of registration on their income, property, and employees. They cannot be forced to pay taxes to Ukraine for their Ukrainian crew members. As for the sailors themselves – there’s currently no effective mechanism that can force them to pay Ukrainian taxes.”
The main issue lies in the inability of the tax authority to determine seafarers’ actual income. There are no algorithms to identify nonpayers or request financial information from foreign employers. The only party with accurate income data is the shipping company, and it is under no obligation to share it. As a result, Ukrainian tax authorities often attempt to apply general legal norms that simply do not fit the maritime profession.
The editorial board of The Maritime Telegraph emphasizes that any information contained in seafarers’ agreements, contracts, or employment documents is strictly confidential and may be disclosed only with the seafarer’s explicit consent. Neither state regulatory authorities nor private entities have the right to seize or demand such information. Therefore, seafarers are strongly advised to exercise utmost caution when using websites or any other online platforms that request personal or confidential data.
Taxes and crewing agencies
Ukraine’s tax service has repeatedly tried to make crewing agencies responsible for controlling or reporting seafarers’ income taxes. However, maritime companies do not have access to full salary data. Only general averages within the industry. Moreover, under Ukrainian data protection laws, crewing agencies cannot disclose personal information without written consent.
Therefore, any official requests from tax authorities to provide details about seafarers’ contracts or wages have no legal basis and can be lawfully refused.
Taxes and banks
Under financial monitoring laws, banks must verify the legality of funds in clients’ accounts. However, such data is protected by banking secrecy and may only be disclosed by court order. The tax service has no authority to demand it.
The Seafarer’s Electronic Cabinet
The introduction of the Seafarer’s Electronic Cabinet in 2020 with login authentication via PrivatBank raised fears that sailors’ personal and financial data might become accessible to tax authorities. But according to the lawyer, these fears are unfounded.
“It’s impossible to identify a seafarer as a taxpayer through the Electronic Cabinet,” she said. “The system does not use Ukrainian tax identification codes or national passports. Only foreign and seafarer passports are required, which contain no taxpayer data.”
Even if employment contracts were somehow uploaded to the system, they would not reveal actual voyage earnings, which often differ significantly from base contract rates.
Taxes paid, but no pension?
Here’s the key issue: even if a Ukrainian seafarer pays income tax at home, this does not guarantee the right to a Ukrainian pension. Only those who pay the Unified Social Contribution (USC), 22% of income, are eligible. After pension reform, the concept of “work record” was replaced by “insurance record,” reflecting the period during which social contributions were made.
Currently, the maximum pension in Ukraine is capped at 19,340 UAH, regardless of how much tax a person has paid.
Seafarers who spent their lives at sea but did not contribute to the social fund are entitled only to minimal social support upon retirement. To qualify for even a basic pension, a seafarer must voluntarily participate in the state insurance system by signing an agreement with the tax office. Contributions can be based on either the minimum or actual wage. Alternatively, seafarers may join private pension funds and independently choose contribution levels and payment schedules.
