Fable: a citizen of Ukraine, who has been permanently residing in the EU country for several years, recently sold shares in a Ukrainian company to non-resident. Settlements between the seller and the buyer of corporate rights were carried out outside Ukraine.
The question arose: should the income from the sale of corporate rights in the Ukrainian LLC be taxed in both countries – in Ukraine (at the source of income and according to the citizenship of the seller) and in the country of permanent residence (where the seller has been paying taxes on income) (another example can be found here)?
Individual tax advice in this case is ineffective. Lawyers had to apply to the double taxation issues.
Solution to the problem: Lawyers of the Zilver Law Firm recommended filing a tax declaration in Ukraine, indicating the income in Ukraine from the sale of corporate rights, as one that is not taxed in Ukraine.
The Tax Service drew up an inspection report, considering the relevant income to be taxable in Ukraine, despite the documents submitted by the lawyer on the seller’s tax “non-residence” and on the inclusion of the corresponding income in the tax base in the respective EU country. As a result, so-called “tax notice-decision” was issued.
But already in the administrative procedure for appealing against the “tax notice-decision”, the lawyers managed to prove that the seller is a tax resident of another country, despite his Ukrainian citizenship, and that the relevant agreement on the avoidance of double taxation is subject to application. As a result, by the decision of the State Tax Service of Ukraine, “tax notice-decision” was canceled, and taxes are paid only in the country of permanent residence of the seller of corporate rights.
The controversial situation was resolved without going to court: saving resources of all parties!
The case was handled by lawyers: E.O. Zarudnev, Ya. Yu. Salenko.