Refund of overpaid withholding tax in Ukraine

Taxation of Non-Residents’ Income

The withholding tax applies to income that non-residents receive from Ukrainian sources, inter alia, dividends, interest, royalties, rent, lease payments, engineering service fees, freight charges, agency commissions, and gains from the sale of certain investment assets.

As a rule, the resident of Ukraine (or, in certain cases, a non-resident) who pays income to the non-resident is responsible for calculating, withholding, and remitting the tax as the tax agent. The responsibility falls directly on the non-resident only in certain exceptional cases.

The standard withholding tax rate is 15%. At the same time, subject to compliance with the requirements of the Tax Code of Ukraine and the provisions of applicable double taxation treaties, a reduced tax rate or a tax exemption may apply.

Procedure for refunding overpaid withholding tax

If tax withheld from a non-resident’s income exceeds the amount required by an international treaty, the non-resident may claim a refund using the procedure described below.

A non-resident may file an application for a refund of excess tax withheld in free form.

The application must be submitted to the tax authority at the location (place of residence) of the person who paid the income and withheld the tax, within 1,095 days from the date the overpayment occurred.

The application is accompanied, in particular, by: 

• a certificate confirming the non-resident’s tax residency in the relevant country; 
• documents confirming the payment of income to the non-resident and its amount; 
• documents confirming the fact of tax payment to the budget and its amount.

After reviewing the application, the tax authority will make one of two decisions:

• to refund the excess tax withheld;
• to refuse such a refund (with due justification).

If a refund is approved, the Treasury transfers the funds to the account of the person who paid the income and withheld the excess tax.

That person is then responsible for refunding the over-withheld amount to the non-resident, representing the difference between the tax withheld and the amount due under the international treaty.

What practical aspects should be considered?

Although it is possible to claim a refund of over-withheld non-resident income tax, in practice this process is not straightforward.

Non-residents may face the following challenges when applying for a refund from the tax authorities:

• receiving a refusal from the tax authority to refund the over-withheld tax due to: i) existing information that no overpayment of withholding tax was identified during a previous tax audit of the tax agent; ii) no such audit was conducted;
• receiving a request from the tax authority to provide additional documents or information not directly required by tax legislation;
• receipt of a refusal from the tax authority to refund the overpaid tax on the grounds that the non-resident failed to provide information on the beneficial recipients of the income;
• the tax authority’s failure to take the decision required by the Tax Code of Ukraine following the consideration of an application for the refund of overpaid tax. 

Court practice indicates that such actions by tax authorities can be regarded as inconsistent with the rights of non-residents. 

For example, the Supreme Court, in its ruling as of April 16, 2021, in case No. 420/1585/19, concluded that the findings in the tax audit report concerning the tax agent cannot affect the rights, obligations and legitimate interests of the non-resident during the consideration of their application for a refund of over-withheld tax. 

Furthermore, the procedure for the tax authority’s consideration of applications for the refund of over-withheld tax does not provide for the need to conduct a tax audit of the tax agent.

Regarding the tax authorities’ reference to a non-resident’s failure to provide information on the beneficial recipient of income as grounds for refusing to refund over-withheld tax, the Supreme Court, in its ruling as of January 14, 2026, in case No. 420/4892/25, concluded that such a position is unlawful. 

In particular, it was noted that the matter of identifying the beneficial (actual) recipient of income when considering the relevant application of a non-resident for the purpose of determining the right to apply a reduced withholding tax rate rests with the tax authority. The latter, in turn, may use international cooperation mechanisms to obtain such information, rather than refusing to grant the non-resident’s application on the grounds that they have not provided such data.

In its ruling as of November 18, 2021, in case No. 640/31711/20, the Sixth Administrative Court of Appeal emphasized that tax legislation clearly sets out the possible outcomes of the consideration of a non-resident’s application for a refund of over-withheld tax: either a decision to grant a refund or a reasoned refusal to do so. Failure by the tax authority to adopt one of the aforementioned decisions indicates non-compliance with the provisions of tax legislation. 

Conclusions

Although a mechanism exists to refund excess repatriation tax withheld, its practical implementation may be complicated when dealing with tax authorities.

At the same time, the court practice shows a positive trend toward protecting the rights of non-residents and recognising unjustified decisions or inaction by tax authorities as unlawful.

In accordance with established court practice, non-residents seeking a refund of overpaid withholding tax should clearly substantiate their entitlement in the application. In particular, they should refer to the applicable tax rate in accordance with the international treaty and the circumstances that confirm its application. Particular emphasis should be placed on the obligation of the tax authorities to comply with the established procedure for considering such an application.

And if you receive an unfounded decision or no response from the tax authority after your application is reviewed, do not overlook the available appeal mechanisms for challenging such decisions or inaction.