1 How does an individual become taxable in your jurisdiction?
According to Ukrainian law, an individual can be considered a tax resident of Ukraine if he or she meets the Ukrainian tax residency criteria, which
are as follows:
• if the individual has a domicile in Ukraine;
• if the individual also has a domicile in another country, the individual is deemed a resident of Ukraine provided he or 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 or her centre of vital interests is situated in Ukraine (eg, 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);
• if it is not possible to determine the actual centre 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 or 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 or 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; and
• 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, regardless of whether they are tax residents or not. Individuals as 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 work performed in Ukraine, whether paid by a Ukrainian
or a foreign company.
Both resident and non-resident individuals are taxable at the same tax rates, being 15 per cent and 20 per cent applied as follows:
• the 15 per cent rate applies to monthly income up to a threshold of 10 minimum wages per month (since 17 September 2015, 13,780 hryvnas);
• the 20 per cent 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), income from trading or professional activities (including operations with intellectual property), income 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 or employer.
3 What, if any, taxes apply to an individual’s capital gains?
The general rate applied to employment income is 15 per cent (to monthly income not exceeding 10 minimum wages) and the 20 per cent rate applies to monthly income exceeding that threshold.
All passive income (including royalties, bank deposit interest, but excluding dividends, except for those paid out by joint investment institutions), and investment income is taxed at a 20 per cent rate. Dividends, paid out by resident CPT payers are taxed at a 5 per cent rate, and those paid out by non-residents at 15 per cent. Winnings and prizes are subject to 30 per cent tax by both residents and non-residents, except winnings in the state lottery and those received from a gambling organiser. As an exception, cash winnings in sports (other than remuneration to athletes) are subject to the standard 15 per cent and 20 per cent tax rate.
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 per cent if the taxpayer makes more than one sale per year. Gains derived from the sale of moveable property by a resident are subject to a 5 per cent rate; gains derived by a non-resident are subject to a 15 per cent or 20 per cent rate. As an exception, income derived by the taxpayer from the sale (exchange) during the year of one of the objects of personal moveable 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 per cent for residents, and 15 per cent and 20
per cent for non-residents.
4 What, if any, taxes apply if an individual makes lifetime gifts?
In Ukraine, funds, property or property rights, and the cost of work or services presented to the taxpayer as a gift shall be taxable in the same way as inheritance.
Inheritance (real estate, chattels, securities, corporate rights, cash, insurance, etc) and gifts are taxable at the following rates:
• zero per cent if the recipient is a resident defined as a close relative (parent, spouse, children, etc);
• 5 per cent if the recipient is a resident not qualified as a close relative; and
• 15 per cent (or 20 per cent on income which exceeds 10 minimum wages per month) if the recipient (non-relative) is a nonresiden but the testator was a resident (or vice versa).
Please find the full chapter by clicking on the link below.