Mandatory Registration of Non-residents with Ukrainian Tax Authorities – by March 31st, 2021

The BEPS legislation passes in Ukraine in 2020 mandates that non-residents that operate in Ukraine through representative offices or permanent establishments must register with the tax authorities before 31 March 2021. This tax registration will be different from the registration of a representative office/permanent establishment.

In order to register a non-resident must submit a special application to the local tax authority. The application needs to be accompanied by additional supporting documents. These include documents that:

1. contain the non-resident's registration data;
2. confirm the authorities of the non-resident's representative submitting the application;
3. certify the accreditation of the non-resident's separately-run division.

According to our understanding of the Tax Code, the registration of non-residents whose permanent establishments are corporate income tax (CIT) payers means that such non-residents become CIT payers themselves and are required to submit appropriate tax filings. Permanent establishments should be deregistered as CIT taxpayers but will remain payers of and report on other taxes.

At the same time, many issues related to practical effect of the new regulations remain unresolved, in particular the procedure for paying taxes and reporting by non-residents, including financial reporting. Therefore, we will monitor further developments and keep you updated.

Note that effective from 1 January 2021, taxable income of non-residents operating through permanent establishments in Ukraine is determined in accordance with arm’s length principle (according to transfer pricing rules), depending on the distribution of functions and risks between such permanent establishments and their head offices. This is a new approach in Ukraine and business practice of its application is limited. We suggest that we discuss this in detail to ensure that you follow the right approach.

Our team are ready to help you:

1. register the non-resident entity with Ukrainian tax authorities;
2. develop approaches to accounting for a non-resident's operations through a permanent establishment and determining a non-resident's Ukraine-sourced taxable income;
3. advise on the methodology and practice of submitting Ukrainian tax filings by a non-resident and / or its separately-run divisions.

If you have any questions regarding this Information Letter, please contact Deloitte Ukraine's attorneys-at-law and tax advisors.