Law of Ukraine “On Amendments to the Tax Code of Ukraine on Improving Tax Administration, Elimination of Technical and Logical Inconsistencies in Tax Legislation” No. 466-IX of January 16, 2020 (hereinafter – Law No. 466) amends the registration of non-residents. Let's consider all the changes.
Permanent establishment
Law No. 466 changes the approach to the concept of permanent establishment. Indeed, in subitem 14.1.193 of the Tax Code of Ukraine (hereinafter – Tax Code) the nature of such establishments will be clearly stated. It is also stated that the following will not be considered as permanent establishments:
a) use of buildings or structures solely for the purpose of storing, displaying goods or merchandise belonging to a non-resident;
b) storage of inventories (goods or products) belonging to a non-resident, solely for the purpose of storage or demonstration;
c) storage of inventories (goods or products) belonging to a non-resident, solely for the purpose of processing by another enterprise;
d) maintenance of a permanent place of business solely for the purpose of purchasing goods or merchandise or collecting information for the non-resident;
e) referral to the person of natural persons within the framework of execution of agreements on personnel services;
f) maintenance of a permanent place of business for another purpose, provided that such activities (their combination) are of a preparatory or ancillary nature for such non-resident.
The appearance of a detailed list of cases when a non-resident has a permanent establishment in Ukraine is due to the fact that the legislator wants to list all non-residents working in Ukraine.
Therefore, Law No. 466 stipulates that non-residents (foreign law firms, organizations) operating in Ukraine through separate divisions, including permanent establishments, either acquire real estate or receive property rights in Ukraine, or open accounts in banks of Ukraine, obliged to register with controlling authorities.
Registration
Registration in the controlling body of a non-resident takes place no later than the next working day from the date of receipt of the relevant application and copies of documents (with presentation of originals) confirming the start of operations by non-residents on the territory of Ukraine. Such application and documents should be submitted:
- within 10 days after accreditation (registration, legalization) on the territory of Ukraine of a separate subdivision – to the controlling body at the location of the separate subdivision;
- prior to the acquisition of real estate or property rights in Ukraine – to the supervisory authority at the location of real estate;
- prior to the opening of an account in Ukraine – to the controlling body at the location of the institution (branch) of the bank or other financial institution where the account is opened.
Tips for those who work without being registered
The Tax Code provides three months for registration from July 1, 2020 for those non-residents who already work in Ukraine without registration and are now required to register. To register as a non-resident, you must submit an application no later than October 1, 2020 (item 64.5 of the Tax Code). Those non-residents who will not register in 2020, will be registered by the tax authorities themselves based on the results of inspections, which they will begin to conduct from January 1, 2021.
It is better not to wait until the controllers find you and after verification on the basis of the act put you on record, as for in the event of absence of registration a non-resident will be subject to fine of UAH 100,000, as well as to simple detention of non-resident’s assets (subitem 94.2.9 of the Tax Code).
These non-residents will be registered until the alienation of real estate and/or closing of all accounts in banks and other financial institutions of Ukraine and/or closing of separate divisions on the territory of Ukraine, including permanent establishments, provided that there are no other taxable objects in Ukraine and objects related to taxation.
