Taxation of taxpayers from different countries should always be considered individually, but for a better understanding we give an example of dividend taxation between residents of Ukraine and Austria.
How are dividends paid by Ukrainian companies to their founder in Austria taxed?
The issue is more related to double taxation and the ability to minimize the tax burden on dividends paid.
What taxes are provided under Ukrainian law?
From dividends paid to individuals (including non-residents), the tax on individuals is withheld at the rate of:
– 9% if the profit is distributed by a non-resident non-payer of income tax (p.167.5.4. P. 167.5 of Article 167 of the Tax Code Ukraine);
– 5% if the profit is distributed by a resident-payer of income tax (p.167.5.2. P. 167.5 of Article 167 of the Tax Code of Ukraine);
– 1.5% military tax (paragraph 16-1 of subsection 10 of section XX of the Tax Code of Ukraine).
Dividends paid to legal entities (including non-residents) are subject to income tax at the rate of 15% (subparagraph 141.4.1 paragraph 141.4 of Article 141 of the Tax Code of Ukraine).
Avoidance of double taxation
Under the Convention between the Government of the Republic of Austria and the Government of Ukraine for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital (hereinafter referred to as the “Convention”), dividends shall not be taxed twice.
According to Art. 10 of the Convention, dividends are taxed in the country from which the dividends are paid. They may also be taxed in the recipient’s country, but not more than:
- 5% of the total amount of dividends, if the actual owner of the dividends is a company that directly owns at least 10% of the capital of the company that pays dividends;
- 10% of the total amount of dividends in all other cases.
Accordingly, when a Ukrainian company pays dividends to an Austrian participant, taxes will be paid in Ukraine in accordance with the Tax Code of Ukraine, and in Austria the tax burden should be limited to 5% or 10% depending on individual conditions.
Please note that in order to use the Convention, you must obtain a certificate of taxes paid in Ukraine (or claim the decisions of the Ukrainian tax authorities).
For legal assistance in working with foreign companies, payment of dividends abroad, appeals against the results of tax audits, you can contact the law firm “Zilver”: +380501409560 (Viber, WhatsApp, Telegram), e -mail: info@zilver.com.ua
We also recommend that you read the legal advice:
Procedure for challenging the results of tax inspection in Ukraine
Annual meeting of participants of LLC
Payroll of dividends in Ukraine
Template of the Shareholders meeting about dividends distribution of the Ukrainian LLC
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