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

State Tax Service has strengthened control over international tax minimization schemes, including through relationships with non-resident related parties.

To date, income payments to non-residents with source of origin from Ukraine is partially used as a basis for withdrawing funds:

115 billion UAH of income was sent abroad according to results of 9 months of 2023, which is 19% less than in the same period of 2022, of which 1.7 billion UAH of tax was accrued.  

At the same time, there are currently restrictions on currency transactions according to Resolution of the National Bank of Ukraine №18 as of 24.02.2022 (as amended).

More than 20 percent of payments are risky, i.e. payments are made in favor of non-residents who are not the beneficial (actual) owners of received income, in favor of unregistered permanent representative offices of non-residents on the territory of Ukraine, or based on analysis of the business entity's activities, when abuse of provisions of conventions for obtaining advantages in taxation is seen.

Significant payments are made to companies registered in the Republic of Austria (26%), France (22%), Republic of Cyprus (9%), Kingdom of the Netherlands (9%), United Kingdom (7%) and other countries, primarily payments in the form of securities transactions, royalties, dividends, interest, etc.

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

As of today, effective communication with foreign countries has been established, therefore completeness, quality and promptness of provision of requested information by the competent authorities has increased significantly, which allows efficient working out the tax evasion risks in the future.

Income tax of foreign legal entities was additionally accrued in the amount of 6.2 billion UAH in 2023.

Herewith, please note that according to current legislation (Sub-paragraph 69.38 Paragraph 69 Sub-section 10 Section XX "Transitional provisions" of the Tax Code of Ukraine (hereinafter – Code)) temporarily, for a period from August 1, 2023 until termination or cancellation of the martial law on territory of Ukraine, in case that the taxpayer independently corrects errors that led to the understatement of tax liability in compliance with procedure, requirements and restrictions specified in Article 50 of the Code, such taxpayer is exempted from calculation and payment of financial sanctions and penalty provided for in Paragraph 50.1 Article 50 of the Code.

State Tax Service draws the taxpayers’ attention that voluntary clarification of paid income tax amounts from non-resident incomes will allow business to reduce burden of paying financial sanctions and penalties, which are accrued during the audit work.