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Changes for foreigners in tax legislation of Ukraine in 2017

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Changes for foreigners in tax legislation of Ukraine in 2017 21.02.2017 22:42

Numerous of changes to the Tax Code of Ukraine came into force, including those concerning foreigners since January 1, 2017.

First of all, it should be noted that in the normative regulation of taxation issues of foreigners used the term «non-resident» and «resident». According to pp.14.1.213 p.14.1st. 14 of the Tax Code of Ukraine the physical person is the resident if a person has a residence in Ukraine. In case if individual has his domicile also in foreign country, he is considered a resident:

  • if the person has a permanent residence in Ukraine;
  • if the person has a permanent home also in a foreign country, it is considered a resident if he has a close personal or economic relations in Ukraine.

In the event that it is impossible to determine the state in which the individual has his center of vital interests, or if the individual has no permanent residence in any of the states, he is considered a resident if he is in Ukraine at least 183 days (including the day of arrival and departure) for a period or periods of the fiscal year.

Sufficient (but not exclusively) condition for determining the location of the vital interests of an individual is the place of permanent residence of members of his family or his registration as a business entity. If you cannot determine the residency status of an individual, using the preceding provisions of this subsection, individual is considered a resident if he is a citizen of Ukraine.

If individual contrary to the law is a citizen of Ukraine and has the citizenship of another country, for tax purposes of this tax, such person is a citizen of Ukraine who has no right to enrollment the taxes paid abroad, noted in norms of the Tax Code of Ukraine or international agreements of Ukraine.

Who is non-residents

According to the definition given in pp. 14.1.122 p. Article 14.1. 14 of the Tax Code non-residents are:

  • foreign companies and organizations formed under the legislation other countries and their registered (accredited or legalized) in accordance with the legislation of Ukraine branches, representative offices and other subdivisions located on the territory of Ukraine;
  • diplomatic missions, consular offices and other official representatives of other countries and international organizations in Ukraine;
  • individuals who are not residents of Ukraine.

The Permanent Mission is fixed place of business through which wholly or partly carried on business activities of non-residents in Ukraine, in particular:

  • place of management;
  • branch office;
  • office;
  • factory;
  • workshop;
  • installation or structure for the exploration of natural resources;
  • mine, oil/gas well, a quarry or any other place of extraction of natural resources;
  • warehouse or buildings used for the delivery of goods.

Income taxation of non-residents

Amount of non-residents profits who carry out their activities in Ukraine through a permanent establishment are taxed in the general order.

In case if incomes in Ukraine are paid to non-resident by legal entity or self-employed individual, such resident is considered a non-resident tax agent in respect of such incomes. When signing a contract with non-resident, the terms of which envisage receipt of such non-resident income from sources in Ukraine, the resident is obliged to specify in the contract the tax rate that would be applicable to such incomes. In case if incomes are paid to non-resident by another non-resident, they should be credited to the account opened by the non-resident in the resident bank, whose regime established by the National Bank of Ukraine. In this case, such bank is considered a tax agent at the time of any debit transactions from this account.

According to pp.170.10.4. p.170.4 st.170 of the Tax Code of Ukraine on the results of the tax year in which the foreigner has acquired the status of a resident of Ukraine, he must file an annual tax return, which indicates incomes in Ukraine and foreign income.

Incomes received by non-residents in Ukraine are taxed in the manner and at the rates specified in st.141.4 of the Tax Code of Ukraine. These revenues include interest, dividends paid by a resident, royalties, etc.

As a general rule (i.e. if not take into account certain prescribed by the law cases, such as other rate or exemption from tax possible in the application of international treaty) resident or permanent establishment of the non-resident carrying on non-residents or authorized person (other than a permanent establishment by non-resident in Ukraine) any payment from income in Ukraine received by non-residents carrying out economic activities (including non-resident accounts in national currency) holding tax on such income defined by pp. 141.4.1 of the Tax Code of Ukraine, at a rate of 15% of the amount which is paid to the budget on of such payment.

In addition to revenues determined by pp.141.4.3-141.4.6 of the Tax Code of Ukraine (the provisions of which remained unchanged), and in particular, a new paragraph of the Tax Code of Ukraine introduced by the Law №1797-VIII of 21.12.2016. These revenues include incomes of nonresidents in the form of interest on loans or financial loans granted to residents and taxed at the rate of 5% at the source of payment of such income and the expense of such revenues while respecting conditions.

Not subject to tax

Incomes are tax deductible received by nonresidents in the form of interest or income (discounts) on government securities or municipal bonds or debt securities performance of obligations under which achieved by national or local guarantees, or interest paid to non-residents for received by state or municipal budget loans (loans or foreign borrowing), are displayed in the State Budget of Ukraine or local budgets or cost estimates of the National Bank of Ukraine, or credits (loans) obtained business entities and the implementation of which provided by local or state guarantees.

There were also changes to the st.170.10 of the Tax Code of Ukraine «Taxation of incomes received by non-residents», including the taxation of foreign incomes. As a general rule, the income accrued (paid provided) in favor of non-residents are taxed according to the rules and rates set out for residents. Except as otherwise noted.

The law provides that a reduced rate (9%) will be taxed foreign incomes as dividends that envisaged by pp. 167.5.4 of the Tax Code of Ukraine (changes to which are not included). In this connection the rate of 18% will apply the total.

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