General provisions on taxation of the sale of corporate rights of a Ukrainian enterprise can be found in our publication at the link. In this publication, we will consider certain features of the purchase and sale of corporate rights in a Ukrainian enterprise by non-residents, namely:
- What bank account should I use?
- Mandatory provision in the contract
- What bank account should I use?
In accordance with subparagraph 170.10.2 of paragraph 170.10 of Article 170 of the Tax Code of Ukraine, when a non-resident sells corporate rights in a Ukrainian enterprise to another non-resident, payment must be made through an account opened by the non-resident payer (buyer) in a resident bank (i.e. a Ukrainian bank). And such a bank is considered a tax agent for such a transaction.
If non-residents (buyer and seller) of corporate rights do not pay through an account in a Ukrainian bank, it will be difficult for the buyer to prove their expenses on the acquisition of the investment asset. Accordingly, upon further sale of such corporate rights, taxes will have to be paid on the entire value of the corporate rights, without deducting the acquisition expenses.
Therefore, we recommend carrying out transactions for the purchase and sale of corporate rights of a Ukrainian enterprise through bank accounts in Ukraine.
- Mandatory provision in the contract
If a non-resident receives investment income from a transaction with a resident of Ukraine (for example, a non-resident sells corporate rights to a resident), then the resident of Ukraine acts as a tax agent of the non-resident. Moreover, according to subparagraph 170.10.3 of paragraph 170.10 of Article 170 of the Tax Code of Ukraine, when concluding such an agreement with a non-resident, the resident is obliged to specify in the agreement the tax rate that applies to such income.
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