tax-equivalent rate
Also called: taxable-equivalent yield
The rate a taxed option would need before tax to leave you the same as a tax-free one: the tax-free rate divided by (1 − tax rate).
Two savings options can't be compared by the numbers on their ads when one is taxed and the other isn't. The tax-equivalent rate turns the tax-free rate into the rate a taxed option would need before tax to leave you exactly the same: divide the tax-free rate by (1 − tax rate).
In Ukraine, as of September 2026, the bank withholds 23% of deposit interest (18% personal income tax plus the 5% military levy), while interest on government bonds held by individuals isn't taxed. So a 16% tax-free bond equals a deposit at 16 / 0.77 = 20.78% before tax. Going the other way, a 14% deposit leaves 14 × 0.77 = 10.78% after tax.
The comparison only covers tax. Before choosing, compare the other differences too: who guarantees the money, how quickly you can get it out, and what happens if you need it before the end of the term. Tax rules change, so check the current rates.
Example
Dana compares a 12-month hryvnia deposit at 14% with hryvnia government bonds at 16%. After 23% tax, the deposit keeps 10.78%. To match the bond's 16% after tax, a deposit would have to pay 16 / 0.77 = 20.78% before tax, and no big bank's 12-month deposit paid that in late September 2026.
Common mistakes
- Comparing ad rates. 14% vs 16% understates the gap when only one of them is taxed.
- Taxing the whole deposit. Tax is a share of the interest, not of the money you put in.
- Stopping at tax. A higher after-tax rate can come with less access or a different guarantee.