Zubrytska Accounting Clinic:

Information Letter No. 5/2024 addresses specific questions from taxpayers seeking individual tax consultations in the field of international taxation. One of the key issues discussed concerns the taxation of non-residents’ income derived from sources in Ukraine, particularly in the context of loan agreements and payments to non-resident guarantors. Let’s examine when and which payments are subject to taxation.
Taxation of Interest on Loans
According to subparagraph 141.4.2 of paragraph 141.4 of Article 141 of the Tax Code of Ukraine, interest paid to a non-resident as compensation for a loan provided by a non-resident bank is subject to taxation. This occurs at the time of payment unless otherwise specified by international treaties. It is important to note that such income is taxable regardless of the form of payment, ensuring fairness in the tax system.
Payments of Principal
The payment of the principal amount of a loan to a non-resident is not considered income and is not subject to taxation. This is clearly defined in the same subparagraph 141.4.2, providing certainty in financial relations with foreign counterparts. The payment of the principal amount is a return of borrowed funds, hence it does not fall under taxable income.
Importance of Complying with Tax Regulations
These rules are crucial for all foreign investors and financial institutions interacting with Ukrainian partners. Understanding and adhering to these tax regulations allows for proper planning of financial operations and avoiding potential legal issues.
Sources of Information and Consultations
For detailed information and consultations, please visit the State Tax Service of Ukraine. This official resource provides comprehensive information on tax requirements and consultations on international taxation.