Tax optimization and tax planning in Ukraine
Cost of services
Cost of services:
Reviews of our Clients
What we offer
Analysis of the client’s business model for the fiscal risks;
Recommendations for minimizing these risks;
Proposals for restructuring the current business model and transactional flows;
Implementation of a coordinated restructuring scheme aimed at eliminating the existing problems;
Consulting on formation of “source of origin history”, tax amnesty of capital, support of the client’s participation in the tax amnesty campaign in Ukraine;
Planning of tax residency of individuals: criteria for determining the tax residency of an individual in a particular country; tax burden in the selected country; opportunities to offset taxes paid abroad.
Additional services include:
Assistance in selecting a jurisdiction for business relocation:
an overview of the criteria to be used in selecting the right jurisdiction;
analysis of applicable taxation in the selected jurisdiction (income tax, etc.);
ways of financing a new company and possibilities for repatriation of profits (criteria for application of reduced tax rate on repatriation);
recommendations for ensuring a “minimum level of economic presence” in the country of registration;
structuring of trade flows (VAT and its reimbursement, customs clearance of goods in the EU).
Full support for business relocation to another country, including tax planning:
supporting the process of relocation of personnel (conclusion of employment agreements, etc.);
opening a bank account;
determining the risks for your company in the process of relocation;
further full support of commercial activities of the company (development of business contracts, ensuring their compliance with local legislation, coordination with counterparties, etc.).
Advising on the CFC in Ukraine:
analysis of functional load of foreign companies, type of income, taxes paid in another country in order to make a decision on the possibility of CFC profit exemption in Ukraine;
recommendations for restructuring the client’s business model in order to adapt it to the new requirements of Ukrainian legislation;
assistance with CFC profit declaration in Ukraine and tax calculation.
Advantages of tax planning
Tax planning allows:
increase the efficiency of the Client’s business;
make a moderate tax burden, while not violating the requirements of the law;
avoid the models, the application of which raises the interest of the supervisory authorities;
ensure the most correct documented support of transactions, in order to effectively refute possible claims of regulatory authorities.
Our recommendations have nothing in common with:
the conclusion of fictitious transactions;
the deliberate misrepresentation of the amount of income of the company;
the use of contracts with related parties with unreasonable subject matter and price;
other ways to understate the tax burden.
The timeline for each project is individual. It all depends on the complexity of your problem and the desired result.
Service packages offers
- planning the client's future business model (including with the use of foreign companies);
- ownership structure planning, calculation of associated risks;
- development of business contracts for the work of the company;
- Ukrainian business financing planning;
- planning the withdrawal of profits in favor of the participant: miscalculation of tax consequences when paying in favor of a resident and non-resident (advance income tax when paying dividends, repatriation tax when paying interest, etc.);
- support for the registration of a company in foreign jurisdictions on a turnkey basis (provision of an address, services of a director, local accountant, secretarial services, etc.), opening a bank account, ensuring the necessary level of substance for the company (real economic presence in the country of registration);
- planning the client's transaction flows (including with the use of foreign companies), coordinating planned transactions with the bank and accountant, etc.;
- full legal support of the client's business activities in Ukraine and abroad.
- Analysis of the current business model;
- Identification of risks in the current business model;
- Recommendations aimed at optimizing the existing business model: alternative jurisdictions for registering companies that are part of the group; property restructuring; reorganization of transaction flows; restructuring of a group of companies (“strengthening” certain companies of the group, liquidation of “unnecessary” companies), etc.
- Implementation of the proposed measures to optimize the current business model: support for the registration of companies in alternative jurisdictions; support of registration of change of ownership structure; work on a package of documents necessary for the reorganization of financial flows; support for the liquidation of “unnecessary” companies.
Development of an action plan, for example:
- restructuring of a loan into the authorized capital of a Ukrainian company;
- recommendations regarding the “strengthening” of certain group companies in order to be able to enjoy tax benefits;
- recommendations for changing contractual terms in certain transactions;
- restructuring of accounts payable and receivable;
- restructuring of transaction flows;
- restructuring of a group of companies;
- change of ownership structure;
- recommendations on measures aimed at minimizing the risk of a “permanent establishment” in Ukraine, etc.
- structuring real estate transactions with the participation of non-residents (contribution to the authorized capital, purchase and sale, donation, inheritance, etc.);
- support of real estate purchase and sale transactions in Ukraine with the participation (direct or indirect) of non-residents;
- support of transactions for the sale and purchase of corporate rights in Ukrainian LLCs (including those formed by Ukrainian real estate) with the participation of non-residents;
- registration of a permanent representative office of a non-resident in Ukraine;
- obtaining approval from a servicing bank (ukr) for obtaining a loan from a non-resident, approval of various forms of restructuring an existing loan (for example, into authorized capital);
- support of transactions for the purchase of real estate in Ukraine by residents (individuals and legal entities abroad): advising on e-limits and current currency restrictions, development of a package of documents for re-registration of ownership, etc.
- determination of the number of CFCs held by an individual, their income and the functional load of each CFC (in the structure of the client's business);
- determination of the risks borne by each CFC in Ukraine: the risk of the need to declare, as well as the need to pay taxes by an individual as part of their annual reporting;
- determination of the taxable base of a CFC in Ukraine;
- recommendations regarding the restructuring of a group of companies aimed at minimizing the risk of CFCs in Ukraine (liquidation of “unnecessary” companies, change in ownership structure, change in ownership format, redomiciliation of companies, etc.);
- support for the implementation of the approved restructuring scheme;
- assistance with CFC declaration in Ukraine: filling out and filing a tax return, communication with the tax service in case of any questions.
- determining the tax residency of an individual: determining the number of links with Ukraine and the host country (presence of real estate, movable property, family, registration, etc.);
- determining the types of income that an individual receives in Ukraine and abroad;
- identification of risks that the change of tax residence entails, their minimization.
- assistance with choosing the optimal jurisdiction;
- advice on the future taxation system and ways of financing the company;
- “minimal economic presence” in the country of incorporation of the company;
- company profit withdrawal schemes;
- declaration of profits of foreign companies in Ukraine and payment of tax on their profits in Ukraine;
- risks and benefits of business relocation for a client from Ukraine to the chosen jurisdiction;
- support of moving business abroad.
Business Relocation from Ukraine
If you intend to relocate your business from Ukraine to another jurisdiction, we will offer not only assistance in choosing the country suitable for you in terms of type of activity, planned transactional flows, ownership structure and company management, etc., but we will accompany the entire process of business relocation. Our services include:
assistance with registration of the company in the chosen jurisdiction, registration with the tax authorities, opening a bank account and bookkeeping;
assistance with the appointment of a director and relocation/recruitment of employees;
drawing up all necessary documents (including legalization of status in the EU, obtaining a residence permit with the right to work, etc.)
assistance with the search and lease of office – negotiations with the landlord in order to agree on the most favorable conditions for the client; support of the signing of the lease agreement;
assistance with drafting business contracts so they meet the requirements of local legislation;
planning of business operations (in terms of possible tax implications, etc.);
full support of the foreign company’s business on a turnkey basis, assistance in solving all the issues that may arise during its commercial activity, communication with an accountant, bank, counterparties, preparation of documents for the bank, solving any operational issues in the process of business activity.
Tax planning with our lawyers
One of the key tasks set before our lawyers when providing legal support for Clients’ business activities is to ensure the optimal tax burden.
The primary task is always the analysis of the Client’s initial data (current ownership structure, functional load of each company, transactional flows), as well as the goals and objectives the Client sets for itself.
Having analyzed the current structure, we will make recommendations on how to restructure it so that it can be easily adapted to the requirements of rapidly changing legislation, as well as to meet the Client’s objectives and ensure the achievement of their goals.
In the next stage we can accompany the restructuring of the current business model, in accordance with the restructuring plan agreed with the Client.
Double taxation for Ukrainian business
Very often in the process of conducting commercial activities, Ukrainian businesses have questions related to the double taxation of some kind of income. This occurs when two jurisdictions have the right to tax certain income.
To illustrate this point, let’s consider some examples of dividends.
If the founder of the Ukrainian company is a Cyprus company, the dividends received from the Ukrainian company will be subject to a reduced rate of 5% instead of the standard rate of 15% in Ukraine (subject to the conditions stipulated in the agreement on avoidance of double taxation between Ukraine and Cyprus – the ownership threshold of at least 20% and investment of 100 000 euros).
Cyprus will not apply taxation by virtue of the fact that Cyprus, in principle, according to the provisions of its domestic legislation, does not charge tax on incoming dividends. If such a tax existed, it would be subject to reduction by the amount of tax paid in Ukraine (reduced by 5%)
If a member of the Cyprus company is a natural person who is a citizen of Ukraine, then when dividends are paid from Cyprus to Ukrainian no tax arises for a Ukrainian citizen in Cyprus (since by virtue of the provisions of local law, Cyprus does not impose tax on the repatriation of outgoing dividends). But in Ukraine you will have to pay 9%+1.5% on received dividends.
If Cyprus levied tax on outgoing dividends, then we would have to refer to the provisions of the agreement between Ukraine and Cyprus in order to reduce the standard rate of tax on repatriation, provided for by domestic law. Such a treaty provides for 5% (under certain conditions), and in Ukraine we would have to pay the difference between the 5% paid in Cyprus and the 9%. That is, the final tax would be 4% +1.5% in Ukraine. By the way, only personal income tax may be set off, the military fee is not set off since it is not covered by the effect of double taxation treaties.
And one more example. If a member of the Hungarian company is a citizen of Ukraine, then when paying dividends to non-resident of Hungary, the tax rate on repatriation in Hungary (provided for by domestic law) is 15%.
According to the agreement between Ukraine and Hungary, it can be reduced to 5% (subject to the threshold of ownership of a share in the Hungarian company of at least 25%). Thus, having paid 5% in Hungary, in Ukraine you would have to pay only 4% (plus 1.5% military tax).
The same approach applies to any type of income.
As part of tax optimization and tax consulting, our experts will analyze your situation, and help you not only to find an answer to the question of what taxes you need to pay, but also how to optimize this amount.
We are ready to help you!Contact us by mail [email protected] or by filling out the form:
Do I have to pay taxes on my Ukrainian income if I move to another country?
Due to military operations, many Ukrainians have moved and settled in other countries since February 2022. But few people think that a long stay in another country may entail the need to pay taxes in that country. In this case, the presence of a Ukrainian passport will not save you from this obligation, because the concepts of “tax residency” and “citizenship” are totally different, and they do not depend on each other.
To determine tax residency, other criteria are taken into account:
duration of the person’s stay in another country (more than 183 days);
the center of life and economic interests (availability of family, business, real estate, movable property, etc.);
a permanent place of residence, etc.
However, these criteria are different in each country. In most European countries they are quite similar, and in some countries they may differ dramatically (Britain).
Acquisition of tax residency status entails the need to pay taxes on income from the source all over the world – in the country where the person moved and became a tax resident. For example, if a person moved to Austria, then from the salary received from the Ukrainian employer, as well as from the income from entrepreneurial activities in Austria one will have to pay tax at a progressive rate of up to 55% (depending on the amount of income). At the same time, if in respect of salary income you can count on a credit for taxes paid in Ukraine, the income from entrepreneurial activities are not eligible for a credit, as they are not covered by the agreements on avoidance of double taxation.
As part of tax consulting, our company offers services for planning the future fiscal burden in such critical decisions for your business as a relocation or restructuring.
Answers to frequently asked questions
Sure, but in most cases this will require personal presence in the country where the bank account is to be opened. First of all, you need to understand the purpose of opening an account and the possibility of charging taxes both in Ukraine and in the country of residence.
Today, we recommend departing from “mirror loans” in favor of alternative mechanisms, such as the Notional Interest Deduction.
Is it worth participating in the tax amnesty campaign in Ukraine?
What does tax amnesty mean?
This is an exemption from liability for violations of the law that existed at the time of 01.01.2021. That is, only those assets and income that were acquired before 01.01.2021 can participate in the amnesty of capital
Why participate in it?
This is an opportunity to legalize income (by paying a one-time reduced tax rate of 5%/9%/2.5% compared to the usual rate of 18%) and begin to form the history of the “source of funds”.
What does the government guarantee?
There will be no criminal charges and no administrative fines. In addition, confidentiality is guaranteed.
Who can participate?
Residents and non-residents (who at the moment of receiving the income were residents of Ukraine and had to declare this income)
What can be declared?
Everything except cash and Russian assets: money in bank accounts, real estate and movable property, stocks, intellectual property, rights of claim, etc.
When should I file the declaration?
From September 1, 2021 to September 1, 2022, but the deadline will most likely be extended.
What happens if I don't participate in this campaign?
Cash assets over UAH 400,000, real estate exceeding the established sizes (120 sq.m. for an apartment, 240 sq.m. for a house, etc.) and movable property (over 1 car) will be considered to be bought from income on which taxes have not been paid (with the appropriate fiscal penalties)
How can we help?
identify the amount of assets that can be declared;
help with determining their value (for determining the tax);
help with calculating the tax liability and completing a tax return;
file a tax return, help with any related questions the tax authorities may have.
If you are a Ukrainian or foreign entrepreneur who has a business or center of vital interests in Ukraine, this means that you need a qualified and experienced specialist in taxation.
We offer you not just consulting, but the development of tax optimization schemes both as individual projects, and for all your business activities.