Dividends in Ukraine and from Ukraine.
For your convenience this article is divided into two parts : dividends taxation in Ukraine and taxation when dividends “cross the border”.
Part 1. For benefit of residents of Ukraine. Dividends paid by cash assets are not subject to VAT. Dividends paid by goods are subject for VAT. According to Law “About Joint Stock Companies” all joint stock companies should pay dividends only in monetary form. All another legal entities are free in choice of dividends form.
For payer taxation of accrued dividends differs on receiver of the dividends:
- If shareholder is individual, company should withhold 5% Personal Income Tax (PIT) from dividends income on simple shares and 15-17% PIT on privileged shares. Company is obliged to pay PIT before or simultaneously with dividend payment.
- If shareholder is legal entity, company should pay an advance corporate income tax (in 2014 rate is 18%) and company can reduce corporate income tax liability by such advance payment. This advance payment is charged to the payer of the dividends and cannot be withhold from shareholders’ income. Companies which pay single tax cannot reduce single tax by paid advance corporate income tax while they are obliged to pay it. Company is obliged to pay advance tax before or simultaneously with dividend payment.
For receiver dividends received by domestic company from residents are not subject to corporate income tax, exception is non- resident permanent representations.
Part 2. Dividends to non-residents and from non-residents.
Ukrainian company- payer of dividends should reduce dividend payment by withholding tax, with rate 15% or any other rate according to agreement on the avoidance of double taxation between Ukraine and Country of residence of receiver. The list of such countries as for November 2014 is the next: Algeria, Armenia, Austria, Azerbaijan, Belarus, Belgium, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India,
Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Korea (ROK), Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Macedonia, Malaysia, Mexico, Moldova, Mongolia, Netherlands, Norway, Pakistan, Poland, Portugal, Romania, Russia, Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, United Arab Emirates, United Kingdom, United States, Uzbekistan, Vietnam. Rates of withholding tax for dividends under tax treaty agreements as well as royalty and interests you can find here.
Dividend income received by Ukrainian company from non-resident differs on controlled status of payer:
- If payer is controlled by receiver dividends are not subject for tax. For this item company is recognized as controlled, if resident recipient owns more than 20% of the payer entity.
- If payer is not controlled by receiver dividends are subject for tax with option of reducing by offsetting of tax paid by non-resident.
If you have any questions, don’t hesitate to contact us - we’ll be glad to be helpful.