Income payments of non-residents with a source of origin from Ukraine

State Tax Service of Ukraine has strengthened control over the international tax minimization schemes.

As of today, income payment of non-residents with a source of origin from Ukraine can be used to withdraw funds abroad.

1.5 trillion UAH was sent abroad from January 1, 2017 to September 30, 2024, including, according to results of the first half of 2024, 81 billion UAH of income, which is 7% more than in the same period of 2023. In total , taxes in the amount of 41 billion UAH were paid, of which 2.7 billion UAH were paid in the first half of 2024.

Significant payments are made to companies registered in the Kingdom of Netherlands (26%), Republic of Cyprus (20%), Great Britain (10%), Republic of Austria (9%) and other countries – these are primarily payments in the form of dividends, interest, royalties, operations with securities, etc.

At the same time, as of today, restrictions on currency operations have been eased according to Resolution of the National Bank of Ukraine № 18 as of 24.02.2022 (with changes).

One of the tools for gathering evidence for establishing violations in making payments to non-residents is the exchange of tax information with the competent authorities of foreign countries.

Result of establishing effective communication with the foreign competent authorities is completeness, quality and speed of providing information requested by them, which, in turn, allows us to quickly work out tax evasion risks.

It should be noted that the Tax Code of Ukraine (hereinafter – Code) has removed restrictions on conducting audits regarding non-resident income payments as of November 2022.

For a period of 2022 – 9 months of 2024, the controlling authorities conducted 757 audits, as a result of which 11.1 billion UAH were additionally accrued and more than 70 tax audits are ongoing.

The main risks are:

income payment in favor of the non-beneficial – owner of income, which indicates registration of companies in low-tax jurisdictions, with a purpose of “transiting” funds to the final beneficiaries who are registered in the offshore jurisdictions (established in 85% of audits);

improper use of preferential tax rate, in connection with proof by the controlling authorities that non-residents carry out activities on the territory of Ukraine, through a permanent representative office (established in 11% of audits);

violation of requirements of conventions on the avoidance of double taxation (established in 4% of audits).

Reminder! Terms of document storage and determination of monetary obligations by the controlling authority (Article 102 of the Code) were changed from 1095 to 2555 days (or from 3 to 7 years) from July 1, 2024.

To the attention of taxpayers: according to Sub-paragraph 69.38 Paragraph 69 Sub-section 10 Section XX “Transitional provisions” of the Code temporarily, for a period from August 1, 2023 until termination or abolition of the martial law in Ukraine, in case of self-correction by the taxpayer, according to procedure, requirements and restrictions specified in Article 50 of the Code, errors that led to an understatement of tax liability, such taxpayer is exempted from imposition and payment of fines and penalty provided for in Paragraph 50.1 of Article 50 of the Code.

Therefore, voluntary clarification of amounts paid of income tax on the income of non-residents will free the business from paying fines and penalties, which are accrued as a result of control measures.

Active work of the State Tax Service in this direction affects improvement of the taxpayers’ tax culture and refusal to use aggressive schemes of international planning.