11:44 13.12.2017

Rada changes rules of taxation of dividends for taxpayers using simplified taxation scheme

Rada changes rules of taxation of dividends for taxpayers using simplified taxation scheme

The Verkhovna Rada has changed the rules of taxation of dividends paid by taxpayers using simplified taxation scheme, including farmers, to owners.

The amendments are outlined in bill No. 6776-d passed at second reading and amending the Tax Code of Ukraine. Most of the amendments are to take effect on January 1, 2018.

"The bill proposes a change in the approach to taxation of dividends paid by taxpayers using simplified taxation scheme. For example, it provides for exemption of these taxpayers from the advance contribution of the profit tax when dividends are paid. Amendments to Article 297 of the Tax Code regarding the obligation of these taxpayers to withhold taxes on income of nonresidents (the so-called "repatriation tax") when income originating from Ukraine are paid to nonresidents," Partner, Head of Tax and Legal Services at Ernst & Young in Ukraine Volodymyr Kotenko told Interfax-Ukraine.

He also said that the decision not to apply to the taxpayers using simplified taxation scheme an advance payment of the profit tax when paying dividends looks logical, since they are not payers of this tax.

"Now dividends received from the taxpayers using simplified taxation scheme by Ukrainian shareholders will be taxed in accordance with the usual procedure. Prior to this, the dividends received were not taxed due to special provisions of the Tax Code, which are planned to be abolished simultaneously with the cancellation of the advance payment for the taxpayers using simplified taxation scheme. A participant of an enterprise paying a single tax is a nonresident, then when paying dividends to a nonresident shareholder, the taxpayer must pay a nonresident income tax - at the rate of 15% or the rate provided in the relevant convention for avoidance of double taxation," Kotenko said.

Some amendments to the Tax Code also concern the specification of transfer pricing rules.

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