Court canceled preferential taxation of non-resident dividends: budget received almost 35 million UAH

Court supported position of the State Tax Service regarding improper use by one taxpayer of benefits provided for by the Convention on the avoidance of double taxation.

Court concluded that the non-resident carries out activities through a permanent establishment in Ukraine, due to which preferential tax rate cannot be applied.

Main economic activity of the non-resident is investment management, and therefore usual form of corporate rights management activities is buying and selling, making decisions on dividend payments and making other organizational administrative decisions, and directly managing cash flows.

Almost all income (99.9%) of the non-resident is dividends from the Ukrainian enterprise.  

Since the non-resident’s representative in Ukraine had broad powers: he concluded agreements, participated in meetings, signed charters without the consent of nominee directors, the non-resident is one who has a permanent place of representation in Ukraine.

Panel of judges found that the non-resident had no legal grounds for applying preferential taxation of dividends. Court of appeal upheld additional assessment of tax liabilities in the amount of 34.7 million UAH, of which 28.9 million UAH is the principal payment. These funds have already been paid to the budget.