Foreign income is not taxed twice
published 06 November 2020 at 18:24 Chapter: News
Current tax legislation provides for the payment of taxes on all types of income received both in Ukraine and abroad (excepting certain types of income defined by the Tax Code of Ukraine, which are not subject to taxation or are exempted from taxation, for example: state and social material benefits received from budgets and funds of compulsory state social insurance; inheritance from family members of the first and second degree of kinship; sale of one car during the year, etc.).
Individuals pay personal income tax and military levy from salaries. These taxes are deducted by the employer as a tax agent.
The Tax Code of Ukraine stipulates that citizens of Ukraine – tax residents working abroad, are required to declare income (Paragraph 170.11 Article 170 of the Tax Code of Ukraine).
At the same time, to avoid double taxation, a number of agreements have been concluded with other countries. Today, more than 70 bilateral intergovernmental agreements (conventions) on the avoidance of double taxation are in force. In particular, these are such countries as Poland, the Czech Republic, Slovakia, Bulgaria, Spain, Portugal, Armenia, Belarus, Georgia, Sweden, Norway, Latvia, Lithuania, Estonia, etc.
These agreements stipulate that income tax paid abroad is credited to the reduction of personal income tax liabilities in Ukraine.
To determine right to obtain a pension, the Pension Fund of Ukraine may take into account the length of service in another country.
In order for Ukraine to have insurance experience acquired abroad in countries with which the bilateral agreements have been concluded, a citizen of Ukraine must officially (legally) work abroad (in some cases for at least a certain period of time – a year) and pay all relevant deductions there, including social security contribution.
Such countries include Armenia, Belarus, Kazakhstan, Kyrgyzstan, the Russian Federation, Moldova, Georgia, Azerbaijan, Tajikistan, Turkmenistan, Uzbekistan, Latvia, Lithuania, Estonia, Poland, Czech Republic, Slovakia, Bulgaria, Spain, Portugal, etc..
The full list of countries with which agreements have been concluded is posted on website of the Pension Fund of Ukraine.
That is, the one does not need to pay tax twice on the same amount!
Moreover as of today, the tax system in Ukraine provides fewer burdens on the taxpayer – individual than the tax systems of most countries.
Personal income tax rates and social burden in the world
| № | Country | PIT | Social payments |
| 1 | Ukraine | 18 % | 22 % |
| 2 | Poland | From 18 to 32% (progressive, depending on the amount of income) | from 19.21 to 22.41% (employer) 13.71% (employee) |
| 3 | Czech Republic | 15% | 34% (employer) 11% (employee) |
| 4 | Slovakia | 19% or 25% (for amount exceeding the subsistence level by 176.8 times) | 35.4% (employer) 13.4% (employee) |
| 5 | Portugal | From 14.5 to 48% (progressive, depending on the amount of income) | 23,75 % (employer) 11% (employee)
|
| 6 | Spain | From 19 to 45% (for non-residents – 24%) (progressive, from the amount of income) | 29,90% (employer) 6,35% (employee)
|
| 7 | Russian Federation | 13 % | 30% (pension and health insurance, temporary disability insurance) |
| 8 | Moldova | From 6 to 15% (depending on the type of income) | 29% (23% employer, 6% employee) |
| 9 | Latvia | From 20% to 31.4% (progressive, depending on the amount of income) | 24,09 % (employer) 11% (employee) |
| 10 | Lithuania | From 20% to 32% (progressive, depending on the amount of income) | 19.5% (pension and medical) |
| 11 | Estonia | 20 % | 33% (pension and health insurance, temporary disability insurance) |
| 12 | Bulgaria | 10 % | 18,92% - 19,62% (employer) 13,78% (employee) |
| 13 | Sweden | 20% (state income tax) and 32% (municipal income tax) | 31,42% (employer) 7% (employee, pension insurance) |
| 14 | Norway | 22% | 14,1% (employer) 11,4% - 8,2% (employee) |
| 15 | Italy | From 23 to 43% (progressive, depending on the amount of income) + regional from 1.23 to 3.33% and municipal from 0 to 0.8% (depending on the region) | 30 % (employer) 10% (employee) |
Reminder! Income tax is one of the main sources of local budgets. Single contribution ] accrued on income of individuals is the main source of pension payments.
19.7 million citizens or 45% received various income totaling 2 trillion UAH in 2019, of which only 9.5 million people of the non-retirement age received salaries. Officially, 13.4 million economically active citizens or 30% of the total population did not receive income in 2019.
According to the Pension Fund, the average monthly salary in 2019, from which the single social contribution (SSC) is paid, amounted 9.205 thousand UAH, ie the SSC –2.025 thousand UAH. The average pension last year was 3.083 thousand UAH.
However, according to Article 7 of the Law of Ukraine “On Compulsory Pension Insurance”, the Pension Fund should have enough SSC. Based on these data, the SSC rate needs to be raised to 34% – it is impossible. This means that the number of taxpayers should increase, or more precisely, citizens should be responsible for paying taxes.
Without paying taxes, people with unemployed family members shift the financing of social benefits and provision of their families with medicine, education, and a number of other services to those who pay taxes.
Therefore, fulfilling obligations to declare income is honesty, first of all, to your compatriots.