The business supports changes to the legislation regarding controlled foreign companies and urgently requests a revision of the rules that lead to double taxation of Ukrainian incomes

28/ 04/ 2023

This week, the Committee on Finance, Taxation, and Customs Policy of the Verkhovna Rada of Ukraine supported an important draft law No. 8137 on improving the taxation of controlled foreign companies (CFCs). It is crucial for both businesses and citizens. The European Business Association welcomes this decision, thanks the Committee of the Verkhovna Rada, and hopes that the Parliament will consider and pass the draft law into law soon. The Association also appeals to the Committee regarding another extremely crucial issue that concerns thousands of Ukrainians. Namely, the difficulties in realizing the right to credit taxes paid abroad in Ukraine. Today, the EBA is scheduled to meet with the head of the Committee, Danylo Hetmantsev, during which the community also plans to raise this issue. According to the current rules, when calculating taxes in Ukraine, it is allowed to credit the amounts of taxes paid abroad. To obtain the right to credit taxes paid outside Ukraine, the taxpayer must obtain a tax certificate from a foreign tax authority stating the amount of tax paid and the tax base/subject of taxation. This certificate must be legalized in the corresponding country. Millions of Ukrainians found themselves abroad against their will. Many of them received income on which taxes were already paid abroad. Ukrainians are required to declare foreign income in Ukraine. However, conscientious Ukrainians who have already paid taxes abroad on their declared income will be forced to pay tax again in Ukraine if they cannot obtain or legalize a foreign tax certificate. The overwhelming majority of Ukrainians have no experience obtaining tax payment certificates from foreign tax authorities and legalizing such certificates. Some categories of citizens (men aged 18 to 60) do not even have the opportunity to travel abroad to obtain legalized tax payment documents from abroad. The problem is more than apparent. Its a pity that the authorities responsible for shaping fiscal policy did not take timely action to solve it. Therefore, the Association appeals to the Cabinet of Ministers of Ukraine, the Committee of the Verkhovna Rada on Finance, Tax, and Customs Policy, and concerned deputies, asking them to develop and implement a mechanism as soon as possible that would prevent double taxation of the incomes of Ukrainians. For example, during martial law, it might be possible to cancel the requirement for obtaining a certificate from a foreign tax authority and to confirm the payment of taxes abroad with relevant bank documents. It would also be appropriate to cancel the requirement for the legalization of certificates issued by foreign tax authorities during the period of martial law. The community is ready to participate in finding a corresponding solution and working on a document that will formalize it. For individuals in Ukraine, the final deadline for submitting a declaration of income for the previous year is approaching on May 1st. We understand it is unlikely to develop and implement a solution by this date. However, there is still time to rectify the situation and change the rules before the deadline for tax payments in Ukraine. So that Ukrainians can submit an amended declaration and account for taxes paid abroad. Therefore, we hope that the voice of the community will be heard!

The European Business Association welcomes this decision, thanks the Committee of the Verkhovna Rada, and hopes that the Parliament will consider and pass the draft law into law soon.

The Association also appeals to the Committee regarding another extremely crucial issue that concerns thousands of Ukrainians. Namely, the difficulties in realizing the right to credit taxes paid abroad in Ukraine. Today, the EBA is scheduled to meet with the head of the Committee, Danylo Hetmantsev, during which the community also plans to raise this issue.

According to the current rules, when calculating taxes in Ukraine, it is allowed to credit the amounts of taxes paid abroad. To obtain the right to credit taxes paid outside Ukraine, the taxpayer must obtain a tax certificate from a foreign tax authority stating the amount of tax paid and the tax base/subject of taxation. This certificate must be legalized in the corresponding country.

Millions of Ukrainians found themselves abroad against their will. Many of them received income on which taxes were already paid abroad.

Ukrainians are required to declare foreign income in Ukraine. However, conscientious Ukrainians who have already paid taxes abroad on their declared income will be forced to pay tax again in Ukraine if they cannot obtain or legalize a foreign tax certificate.

The overwhelming majority of Ukrainians have no experience obtaining tax payment certificates from foreign tax authorities and legalizing such certificates. Some categories of citizens (men aged 18 to 60) do not even have the opportunity to travel abroad to obtain legalized tax payment documents from abroad.

The problem is more than apparent. It’s a pity that the authorities responsible for shaping fiscal policy did not take timely action to solve it.

Therefore, the Association appeals to the Cabinet of Ministers of Ukraine, the Committee of the Verkhovna Rada on Finance, Tax, and Customs Policy, and concerned deputies, asking them to develop and implement a mechanism as soon as possible that would prevent double taxation of the incomes of Ukrainians.

For example, during martial law, it might be possible to cancel the requirement for obtaining a certificate from a foreign tax authority and to confirm the payment of taxes abroad with relevant bank documents. It would also be appropriate to cancel the requirement for the legalization of certificates issued by foreign tax authorities during the period of martial law. The community is ready to participate in finding a corresponding solution and working on a document that will formalize it.

For individuals in Ukraine, the final deadline for submitting a declaration of income for the previous year is approaching on May 1st. We understand it is unlikely to develop and implement a solution by this date.

However, there is still time to rectify the situation and change the rules before the deadline for tax payments in Ukraine. So that Ukrainians can submit an amended declaration and account for taxes paid abroad. Therefore, we hope that the voice of the community will be heard!