When do non-resident companies undergo tax registration in Ukraine?

Accordingly, in cases provided for by law, a company must submit an appropriate application and specified documents to the tax authority. Based on the results of the review, the tax authority makes a decision on the tax registration of such a non-resident.

In this article, we will consider the specific circumstances that require a non-resident legal entity to undergo the tax registration procedure in Ukraine, as well as what specific features should be taken into account for the proper fulfilment of this obligation.

Presence of a separate subdivision in Ukraine

The presence of non-residents in Ukraine may take various forms. For example, non-resident companies may open their own separate subdivisions in Ukraine, in particular, representative offices.

The very fact of creating such a subdivision is an unconditional ground for the tax registration of a non-resident company. At the same time, it does not matter whether this subdivision actually conducts business activities.

For example, both a foreign company that opens a permanent establishment to provide certain services or sell goods, and a company that opens a non-commercial office solely for the purpose of researching the Ukrainian market, will be required to register for tax purposes.

It should be noted that a non-resident creating a permanent establishment in Ukraine and not yet registered for tax purposes is obliged to submit an application for its simultaneous tax registration and registration as a corporate income tax payer.

If the tax authority establishes that a non-resident conducts activities through separate subdivisions without tax registration, it may make a decision to register such a non-resident without an application from the non-resident and apply the statutory penalties (UAH 100,000).

Important: the tax registration of a non-resident’s separate subdivisions does not exempt the non-resident itself from the obligation to separately register for tax purposes.

Place of registration: the tax authority at the location of the separate subdivision.

Deadline for submitting the application: within 10 days after the accreditation (registration, legalisation) of the separate subdivision in the territory of Ukraine.

Acquisition of immovable property in Ukraine

International tax rules usually closely link the taxation of income from immovable property to the state where it is physically located.

Given this, foreign companies that purchase Ukrainian immovable property or acquire property rights to it are obliged to undergo tax registration in Ukraine.

Place of registration: the tax authority at the location of the immovable property.

Deadline for submitting the application: prior to the acquisition of the immovable property or the acquisition of property rights to such property.

Opening an account in Ukraine

It is important to understand that the tax registration of foreign companies does not always depend on whether they have obligations to pay certain taxes or fees.

If a non-resident intends to open an account with a Ukrainian financial institution (for example, a bank or a non-bank payment service provider), it must also undergo tax registration. The same rule applies to the opening of electronic wallets with electronic money issuers.

Exception: opening correspondent accounts for non-resident banks.

Place of registration: the tax authority at the location of the financial institution (branch), non-bank payment service provider, or electronic money issuer where the account or electronic wallet is opened by the non-resident.

Deadline for submitting the application: prior to the opening of the account or electronic wallet.

Acquisition of certain investment assets from another non-resident

Ukrainian legislation provides for the taxation of a non-resident’s profit from the disposal of investment assets in both Ukrainian and foreign companies, where 50% or more of their value is derived from participation interests in a Ukrainian company or from immovable property located in Ukraine.

Therefore, if the sale and purchase of such specific assets takes place between two non-residents, the purchasing company is obliged to undergo tax registration in Ukraine.

Important: tax registration is not required in the event of the acquisition of such assets from residents of Ukraine or from non-residents having a permanent establishment in Ukraine.

Place of registration: the tax authority at the location of the Ukrainian legal entity whose corporate rights form the value of the investment asset being acquired by the non-resident.

Deadline for submitting the application: prior to the date of making the first payment for the investment asset being acquired.

Other cases

There are also some specific grounds in Ukraine for the tax registration of non-resident legal entities.

In particular, a non-resident must also register as a value-added tax payer if it supplies electronic services to individuals within the customs territory of Ukraine, and the total amount of such services exceeds UAH 1 million per year.

Another special situation is the presence of a place of effective management of a foreign company in Ukraine. Although this circumstance results in a change of tax residence, it is also associated with the mandatory tax registration of such a company in Ukraine.

Period for the tax registration of a non-resident

The tax registration of a non-resident is carried out no later than the next working day following the receipt of the appropriate application and the documents specified by law.

Determination of the place of tax registration where several grounds exist simultaneously

Sometimes situations arise when a non-resident has several grounds for tax registration. For example, it simultaneously conducts activities through a permanent establishment and purchases immovable property in different regions of Ukraine. This raises a logical question: is it necessary to register with different territorial tax authorities as a result of such transactions?

To resolve this issue, the tax legislation of Ukraine distinguishes the following concepts:

• principal place of registration: the tax authority where the non-resident is registered as a corporate income tax payer, and in the absence of such registration – the tax authority where the non-resident is registered on the ground that arose first (for example, at the location of a separate subdivision, immovable property, etc.);
• non-principal place of registration: applied if the tax obligations of a non-resident arise in the territory of other administrative-territorial units.

Therefore, a non-resident must register with every territorial tax authority at the location where such obligations arise. The determination of the principal and non-principal places of registration directly depends on the order in which the respective grounds arise.

The tax legislation of Ukraine establishes a list of circumstances under which foreign companies are obliged to undergo tax registration. These include not only the presence of a branch or representative office, but also, in particular, the acquisition of immovable property, the opening of bank accounts in Ukraine, and even the purchase of certain investment assets from other non-residents.

Timely identification of the grounds for registration will allow for the correct determination of the company’s place of tax registration and protect the business from possible violations of the requirements of Ukrainian legislation regarding tax registration, the administration of non-residents, and, where commercial activities are carried out, the payment of taxes by non-residents in Ukraine.

The article was written by:

Viktoriia Bublichenko, Partner at GOLAW, Head of Tax, Restructuring, Claims and Recoveries practice, Attorney at law

Tetiana Fedorenko, Senior Associate at Tax, Restructuring, Claims and Recoveries practice at GOLAW, Attorney at law

Vadym Zhukov, Junior Associate at Tax, Restructuring, Claims and Recoveries practice at GOLAW