The tax service clarified the procedure for withholding repatriation tax when settling with foreign counterparties
Ukrainian companies and entrepreneurs are required to withhold tax when paying income to non-residents with a source of origin in Ukraine. The State Tax Service has clarified the rules for applying the relevant provisions of the Tax Code. This was reported by Головне управління ДПС у Київській області, according to the portal PromPolitInform.
Despite the widespread use of the term “repatriation tax” in professional circles, the current tax legislation does not define it as a separate mandatory payment. In fact, it refers to the mechanism of taxing the income of foreign legal entities received from sources in Ukraine, which is regulated by Article 141 of the Tax Code.
In accordance with the established rules, non-residents receiving such income automatically become corporate income tax payers. The only exceptions are structures endowed with diplomatic immunities or privileges enshrined in international treaties ratified by the state.
Responsibilities of a tax agent
The entity making the payment bears the direct responsibility for withholding tax from payments to a foreign counterparty and transferring it to the budget. This applies not only to large corporations but also to a wider range of business entities.
Those obliged to perform these duties include domestic legal entities, individual entrepreneurs, self-employed professionals, and permanent establishments of non-residents. Status as a taxpayer, including the use of the simplified tax system, does not exempt one from performing these tax functions.
Specifics of taxation for different subjects
Even non-profit organizations are no exception. In the event they pay income falling under the definition of a source of origin in Ukraine, such institutions are required to comply with the taxation procedures provided by the Code for non-resident income.
It is important to consider that the emergence of an obligation to pay tax does not deprive taxpayers of the right to operate under the simplified system. Additionally, one should check the provisions of international agreements on the avoidance of double taxation, as their norms can significantly affect the terms of settlements with specific partners.
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