TAX

1        How does an individual become taxable in your jurisdiction? 

According to the Ukrainian law, an individual can be considered as a tax resident of Ukraine if he/she meets the Ukrainian tax residency criteria, which are as follows:

• An individual is considered a Ukrainian tax resident if he/she has a domicile in Ukraine;

• If the individual also has a domicile in another country, the individual is deemed resident of Ukraine provided he/she has a permanent place of residence in Ukraine;

• If the permanent place of residence is also available in another country, the individual is deemed resident of Ukraine provided his/her center of vital interests is situated in Ukraine (for example, the place of the permanent residence of the members of an individual’s family or the place of an individual’s registration as a business entity etc.);

• If it is not possible to determine the actual center of vital interests, or if the individual does not have a permanent place of residence in any country, the individual is deemed to be tax resident of Ukraine if he/she stays in Ukraine in excess of 183 days during a tax (calendar) year;

• If it is impossible to determine tax residency on the basis of the above provisions, then the individual will be a tax resident of Ukraine if he/she is a Ukrainian citizen;

• A person who fails to qualify as a Ukrainian tax resident will be considered a ‘non-resident’ for purposes of the Tax Code;

• The Tax Code also provides for a self-recognition procedure, according to which an individual can voluntarily elect to be a Ukrainian tax resident;

• In conflict cases, the rules of the relevant double taxation treaties may be applied.

2        What, if any, taxes apply to an individual's income?

In Ukraine, individuals are subject to Personal Income Tax (hereinafter - PIT), regardless of whether they are tax residents or not. Individuals – tax residents of Ukraine are taxed on their worldwide income, while non-residents are taxed on their Ukraine-sourced income only. Ukrainian laws determine Ukraine-sourced income as income derived by an individual as a result of any business activity performed in Ukraine, which, inter alia, includes remuneration for the work performed in Ukraine, whether paid by a Ukrainian or a foreign company.

Both resident and non-resident individuals are taxable at same tax rates being 15% and 17%:

• the 15% rate applies to monthly income up to a threshold of 10 minimum wages per month (in 2014, UAH 12.180, circa USD 940)
• the 17% rate is applicable to monthly income in excess of a threshold of 10 minimum wages per month.

The individual’s income is taxable whether it was obtained in cash or in kind. Taxable income includes employment income (with in-kind benefits); incomes from trading or professional activities (including operations with intellectual property); incomes from the alienation of property; winnings and prizes; insurance payments; interest and dividends; investment income; and contributions to unqualified pension plans made on behalf of a taxpayer by another person/employer.

3        What, if any, taxes apply to an individual's capital gains?

The taxation of an individual’s capital gains depends on the source of the gains.

The general rate applied to employment income is 15% - to monthly income not exceeding 10 minimum wages and the 17% rate applies to monthly income exceeding that threshold.

Interest income is taxed at a 15% rate. Dividends, including foreign dividends are taxed at a 5% rate. Winnings and prizes are subject to 30% tax, except winnings in state lottery and received from the organizer of gambling by both residents and non-residents. As an exception, cash winnings in sports (other than remuneration to athletes) are subject to standard 15%/17% tax rate.

Taxation of royalties and investment income is at 15% rate (if such income exceeds 12 180 UAH. The amount of such excess is taxable at rate of 17%).

Gains derived from the sale of a real estate are not subject to tax if the sale takes place once during the year, provided the owner has held legal title for at least three years before the sale (the three-year ownership period does not apply to inherited property). The rate is 5% if the taxpayer makes more than one sale per year.

Gains derived from the sale of movable property by a resident are subject to a 5% rate; gains derived by a non-resident are subject to 15% or 17% rate. As an exception, income derived by the taxpayer from the sale (exchange) during the year, of one of the objects of personal movable property such as a car or motorcycle is not subject to taxation. Sale of two or more motor vehicles by the same person during the year will be taxed at rates of 5% and 15%/17% for residents and non-residents respectively.

4        What, if any, taxes apply if an individual makes lifetime gifts?

In Ukraine, funds, property or property rights, the cost of work or services presented to the taxpayer as a gift shall be taxable in the same way as inheritances...