Taxation of dividends will be conducted at reduced personal income tax rates

18/ 04/ 2017

Max Lebedev, Managing Associate at GOLAW On April 12, 2017 The President of Ukraine signed the Law, due to which the income tax rate for individuals in the amount of 9% will be reduced for taxation of dividends accrued and paid by: non-residents; legal entities that are not payers of income tax (single tax payers); joint investment institutions (corporate or unit trust). The specified changes will be applied from January 1, 2017. At the same time, the payment of dividends accrued by residents - payers of corporate profit tax (except for income in the form of dividends on shares, investment certificates paid by joint investment institutions) is still subject to tax at the rate of personal income tax of 5%. Thus, depending on the source of payment of dividends, the total tax burden on the income of an individual will be 6.5%(5% personal income tax + 1.5% military charge) or 10.5% (9% personal income tax + 1.5% military collection). We believe that such changes will have a positive effect both for business and for the state, since it will stimulate the payment of dividends without the use of shady schemes. As a result this will provide legal income for business owners and deductions to the state budget.

Max Lebedev, Managing Associate at GOLAW

On April 12, 2017 The President of Ukraine signed the Law, due to which the income tax rate for individuals in the amount of 9% will be reduced for taxation of dividends accrued and paid by:

non-residents;
legal entities that are not payers of income tax (single tax payers);
joint investment institutions (corporate or unit trust).

The specified changes will be applied from January 1, 2017.

At the same time, the payment of dividends accrued by residents – payers of corporate profit tax (except for income in the form of dividends on shares, investment certificates paid by joint investment institutions) is still subject to tax at the rate of personal income tax of 5%.

Thus, depending on the source of payment of dividends, the total tax burden on the income of an individual will be 6.5%(5% personal income tax + 1.5% military charge) or 10.5% (9% personal income tax + 1.5% military collection).

We believe that such changes will have a positive effect both for business and for the state, since it will stimulate the payment of dividends without the use of “shady schemes.” As a result this will provide legal income for business owners and deductions to the state budget.