Tax Residency for Ukrainian Citizens Abroad: Determining Status and Double Taxation

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The issues of determining tax residency and paying taxes for Ukrainian citizens living abroad remain highly relevant.

A tax resident is an individual whose tax obligations are defined by their country of residence.

 

According to Ukrainian tax legislation, you are considered a tax resident of Ukraine if you:

Therefore, even if you have moved abroad and have been living there for more than 183 days, you may still be considered a tax resident of Ukraine.

The Ministry of Finance of Ukraine, in its letter No. 44010-13/2284 “On Recognizing Tax Residency and Avoiding Double Taxation,” provided the following clarification:

“Each country defines the criteria for tax residency in its local legislation, adhering to the principle of equality of all taxpayers before the law. In most European countries, the criteria for tax residency include having a so-called center of personal or economic interests in the country, as well as exceeding a stay of more than 183 days in a tax year.

Therefore, under certain conditions, a Ukrainian citizen temporarily residing in another country may be regarded as a tax resident of that country according to its local legislation.

Issues of avoiding double taxation of income for Ukrainian citizens temporarily abroad, as well as residency conflicts (when both countries consider an individual their tax resident according to local legislation), are resolved within the framework of existing international agreements on avoiding double taxation. These agreements establish rules for the allocation of taxing rights over specific types of income between the taxpayer’s country of residence and the source country of income.”

Currently, Ukraine has 71 international bilateral agreements on avoiding double taxation with other countries.

These agreements contain a specific “Residence” article. When a residency conflict arises (when both countries consider an individual their tax resident according to local legislation), the appropriate test established by the international agreement will apply.

The test for determining an individual’s tax residency includes:

  1. Permanent place of residence
  2. Center of vital interests
  3. Stay in the country for more than 183 days
  4. Citizenship

Overall, it should be noted that the application of the aforementioned principles established in the Convention depends on the specific circumstances of each individual case, which can be assessed by tax authorities only within the context of evaluative activity.

➡️ And what is most important?

✔ Each individual case will be reviewed by competent authorities based on the submitted documents and confirmations, taking into account all circumstances and grounds.

How to Avoid Double Taxation and Minimize Taxes?

 

One of the most effective ways to optimize taxation is to choose a country with a favorable tax policy for obtaining tax residency.

Many countries offer tax programs and special incentives that can significantly reduce your tax liabilities for both individuals and businesses.

Take Cyprus as a prime example of this approach. The tax system in Cyprus offers numerous benefits to its residents.

Firstly, Cyprus has one of the lowest personal income tax rates in Europe (ranging from 0% to 35%), with the first €19,500 being tax-exempt.

Secondly, the jurisdiction boasts a low corporate tax rate of just 12.5%, and for intellectual property companies, it can be reduced to as low as 2.5%. This makes the country attractive for entrepreneurs and business owners.

Moreover, Cyprus offers a range of other tax advantages: no taxes on dividends and interest, allowing you to maximize your investment income; no inheritance and gift taxes; and no annual property tax.

Other EU countries also have favorable tax programs that may suit your situation.

For instance:

• In Portugal, there is a simplified tax regime for self-employed individuals earning less than €200,000 annually.

• In Spain, you can benefit from a flat 24% tax rate on employment income up to €600,000, significantly lower than the progressive rate of up to 48%.

• Greece offers incentives for investors, including an annual flat tax of €100,000 on global income sourced from abroad, and for salaried workers and freelancers, a tax rate of 50% on income earned in Greece.

Optimizing taxation and avoiding double taxation require a careful and strategic approach.

If you have questions such as:

➡️ How to avoid double taxation?

➡️ What documents are needed to confirm tax residency status?

➡️ How to apply double taxation avoidance treaties between Ukraine and your EU country of residence?

 

Contact us for a consultation!

The Feod Group team is ready to answer all your questions!

Every situation is unique, and consulting with professional tax advisors will help you determine the most advantageous strategies for tax optimization.

Our specialists can help you navigate the complexities of international taxation and offer solutions tailored to your individual needs!

 

 

Article author

Anastasia Taran Head of Corporate Services
Ukraine
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes i...
In 2013, she graduated in law from the National University «Odessa Law Academy» with honors and received a Master of Law degree. Anastasia Taran has experience in international and contract law, as well as corporate and tax law in Europe. Within the framework of Feod Group, she specializes in immigration and corporate law of European countries, particularly:
  • family and corporate immigration solutions.
  • establishing a business in Europe.
  • personal and corporate taxation in Europe.
  • opening accounts in European banks.
  • obtaining a tax resident status.
read more
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ALSO READ:

🔹 Income Tax for Individuals in Europe 2024: Rates and Minimization Strategies

🔹 Tax Optimization for Individuals in Cyprus

🔹 Tax Residency Status and Taxes in Portugal

🔹 Property Taxes in Europe 2024: Countries with High and Low Property Taxes

🔹 Taxes in Spain for Foreigners and Residents

 

 

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