Taxation of non-residents in 2017

22/ 02/ 2017

Author: Valentyn Gvozdiy, Managing Partner at GOLAW Attention! Important changes to the taxation of non-residents. The Tax Code of Ukraine redefines the rules for taxation of income of non-residents in the form of interest on loans or financial loans to residents. It is established that such revenues in 2017 will be taxed at 5%. However, rates for the use of such business operation of the non-resident must meet certain conditions: advances to non-residents for a loan or financial credits was obtained them by placing foreign debt securities on foreign stock that is listed, approved by Cabinet; advances to non-resident benefiting from loan or financial credit involved to provide loans or financial credit to resident; resident, who paid interest are not residents of jurisdictions included in the list of offshore states (territories). However, the envisaged exemption of income of non-resident in the form of interest on the loan or financial credit provided to the residents (subject to compliance pp. 141.4.11 of the Tax Code) paid by resident to non-residents or authorized persons: - Until 31 December 2016 if the funds provided by resident financial loan or credit, were involved by placing foreign debt securities on foreign stock exchanges; - In the period from 1 January 2017 to 31 December 2018, if such income meets the conditions paragraphs of 141.4.11 of the Tax Code. Also, for non-residents is provided the possibility to receive confirmation of tax payments annually from the controlling authority. These innovations are aimed at improving the transparency and quality of tax administration, the elimination of widespread tax avoidance schemes, and the removal of existing inconsistencies. We hope that the gradual simplification of the tax system will improve the investment climate in Ukraine.

Author: Valentyn Gvozdiy, Managing Partner at GOLAW

Attention! Important changes to the taxation of non-residents.

The Tax Code of Ukraine redefines the rules for taxation of income of non-residents in the form of interest on loans or financial loans to residents. It is established that such revenues in 2017 will be taxed at 5%.

However, rates for the use of such business operation of the non-resident must meet certain conditions:

advances to non-residents for a loan or financial credits was obtained them by placing foreign debt securities on foreign stock that is listed, approved by Cabinet;
advances to non-resident benefiting from loan or financial credit involved to provide loans or financial credit to resident;
resident, who paid interest are not residents of jurisdictions included in the list of “offshore” states (territories).

However, the envisaged exemption of income of non-resident in the form of interest on the loan or financial credit provided to the residents (subject to compliance pp. 141.4.11 of the Tax Code) paid by resident to non-residents or authorized persons:

– Until 31 December 2016 if the funds provided by resident financial loan or credit, were involved by placing foreign debt securities on foreign stock exchanges;
– In the period from 1 January 2017 to 31 December 2018, if such income meets the conditions paragraphs of 141.4.11 of the Tax Code.

Also, for non-residents is provided the possibility to receive confirmation of tax payments annually from the controlling authority.

These innovations are aimed at improving the transparency and quality of tax administration, the elimination of widespread tax avoidance schemes, and the removal of existing inconsistencies.

We hope that the gradual simplification of the tax system will improve the investment climate in Ukraine.