Should a Company Withhold Personal Income Tax from Beneficial Owners When Paying Dividends?
Should a Company Withhold Personal Income Tax from Beneficial Owners When Paying Dividends?
According to Section IV of the Tax Code of Ukraine, resident individuals who receive income from Ukrainian and foreign sources are the main payers of personal income tax. Legal entities act as tax agents, obliged to accrue and withhold taxes from income paid to individuals.
Tax Obligations of Legal Entities
However, it is important to note that income accrued by a resident in favor of a non-resident, according to Ukrainian tax legislation, is not subject to taxation by personal income tax and military collection. Thus, when a resident legal entity pays dividends to a non-resident legal entity, there is no obligation to withhold personal income tax or military collection.
Payment of Dividends to Residents
In the case of payment of dividends to residents, companies that have already withheld tax on dividends to non-residents do not have obligations to withhold additional taxes in 2022.
Legal Confirmation
This position is confirmed by Individual Tax Consultation No. 673/IPC/99-00-24-03-03 IPC dated 02.09.2024, which can be found on the official website of the State Tax Service of Ukraine.
For additional information and consultation on tax obligations when paying dividends, please contact the “Zubrytska Accounting Clinic” at https://expertz-ua.eu/.
