In this article, we propose to consider the main issues related to the payment of dividends to non-residents of Ukraine, that is, the individuals / juridical persons who are representatives of other states.
First of all, it should be noted that Ukrainian law provides the right of foreign investors to ensure they receive all the profits obtained in our country legally. This immediately indicates that the resident of Ukraine, being the actual issuer of corporate rights, who carries out the payment of dividends to non-residents, is subject to the general legislation on taxation. That means that regardless of the fact to whom the payment of dividends is made, the issuer is obliged to pay an advance fee of 25% without reducing the amount of dividends. International agreements related to the elimination or reduction of double taxation of income does not apply to this payment.
Now let’s discuss in more details the payment of dividends to legal entities which are non-residents of Ukraine.
First of all, we emphasize that when paying dividends to non-resident, who is in fact a legal entity, but has no such status, the issuer of corporate rights is obliged to withdraw 15% withholding tax from this payment. Revocation of such taxation is possible only if there are any additional agreements between the states. Most often, these agreements are related to the exemption of non-residents from double taxation. In this case, the recipient of the dividends is obliged to present a special certificate of residence. The certificate or a certified copy is available to the enterprise that pays dividends. It should be noted that the validity of a certificate is limited to the tax year in which it was issued. Further, the company issuing the document provides the tax authorities together with the completed tax reports on payments made to non-residents.
In those situations when the company-issuer does not use the benefits of an international agreement when paying dividends, and 15% were charged, a non-resident may submit an application to the tax authority at the location of the payer. After the necessary checks, in case of a mistake, the charged funds will be returned.
Now a few words about the payment of dividends to individuals who are non-residents of Ukraine.
Everything is much easier here. Non-residents are individuals who are subject to the same taxes as residents of Ukraine (at the rate of 15%). Control of the deduction of this amount carries an enterprise, which is the issuer of corporate rights. However, in cases where there is an agreement of exemption from double taxation between the states, an individual – non-resident has a right to file a certificate similar to the one which was discussed above. Thus, there is also an opportunity to free themselves from unnecessary costs. However, when it comes to natural persons, such actions do not always bring tangible benefits. In this situation only the high quality and professional accounting analysis can help to assess the relevance of the actions.