In accordance with PP. 14.1.55 of the Tax code of Ukraine (hereinafter – the tax code) foreign income is any income received by a resident from any activities outside the customs territory of Ukraine or territories beyond the control of the controlling authorities.
This includes all-interest, dividends, royalties and any other types of passive income, inheritance, gifts, winnings, prizes, income from the performance of works or services under civil law and employment contracts, income from the provision of residents for rent or use of property located outside Ukraine, including rolling stock transport, assigned to ports located outside Ukraine. In addition, income from the sale of property located outside Ukraine, income from the alienation of investment assets, including corporate rights, securities and the like. That is, the tax code lists all types of possible income of individuals for their final taxation in Ukraine.
In foreign income refers to any kind of salary received by a resident of Ukraine abroad, regardless of whether it was a temporary contract or employment contract concluded for a period of one to several years.
The legislator called all resident individuals receiving income from sources in Ukraine and abroad (PP.) as taxpayers Of personal income tax (hereinafter – pit). 162.1.1 PCs). According to PP. 14.1.213 tax code a person is recognized as a resident of Ukraine, if it:
• has permanent residence in Ukraine;
• has a center of vital interests (the closest personal or economic ties in Ukraine;
• registered as a self-employed person in Ukraine;
• permanent residence in Ukraine-even if there is a place of residence in another foreign country;
• has a place of permanent residence both in Ukraine and in another foreign country, but in Ukraine is the center of his vital interests. For example, members of her family live here permanently or she is registered as a business entity;
• there is a place of permanent residence both in Ukraine and in another foreign country, the center of its vital interests, it is impossible to determine, but it is in Ukraine for at least 183 days (including the day of arrival and departure) during the tax year;
• does not have a place of permanent residence in any of the States, but is in Ukraine for at least 183 days (including the day of arrival and departure) during the tax year;
• independently determines its main place of residence on the territory of Ukraine in the manner prescribed by the tax code.
If one or more of the listed conditions, that person is recognized by the resident of Ukraine. And then all its income (Ukrainian and foreign) are subject to final taxation in Ukraine.
It is worth paying attention to the following moment to determine the residence-if contrary to the law a natural person – a citizen of Ukraine also has the citizenship of another country, then for the purpose of taxation by this tax such person is considered a citizen of Ukraine, who has no right to offset taxes paid abroad, provided by this Code or the norms of international agreements of Ukraine.
The rates for the taxation of foreign income are set by the PP. 170.11.1 PC. They do not differ from those rates that are provided for in paragraph 167.1 of the tax code for the taxation of income received in Ukraine. In addition, since January 1, 2015, income received from sources outside Ukraine is subject to military duty at the rate of 1.5 percent.
Subparagraph 170.11.1 of the tax code obliges all residents of Ukraine receiving income from abroad to declare them regardless of the amount. At the end of the year should submit a Declaration of property and income. Receiving income abroad and not declaring them (without filing a Declaration of property status and income), the resident violates the legislation of Ukraine. For this, administrative liability in the form of a warning or a fine may be applied.
The amount of foreign income is converted into UAH at the exchange rate of the National Bank of Ukraine, effective at the time of receipt of such income.
The tax payer can reduce the amount of annual tax on the amount of taxes paid abroad, according to the norms of international treaties, the consent to be bound by the Verkhovna Rada of Ukraine. To offset the tax paid outside the territory of Ukraine, the taxpayer must provide a certificate from the state body of the country where such income (profit) is obtained, the amount of tax paid, as well as the base and object of taxation. This certificate is subject to legalization in the relevant country, the relevant foreign diplomatic institution of Ukraine .