Advance payment when the payment of dividends to individuals should not be paid. However, according to para.164.2.8 of TCU, income in the form of dividends is included in the total taxable income of an individual and should be taxed by the personal income tax (hereinafter − PIT). At the same time, the obligation to withhold the personal income tax is entrusted to a tax agent who accrues (pays, provides) taxable income in favour of the taxpayer, that is, to the company.
PIT rates
It is important in the taxation of PIT dividends that dividends are taxed final when their accruing, and not their payment (sub-para. 170.5.4 of the Tax Code of Ukraine; hereinafter − TCU). In other words, the VAT rates of 2017, which have undergone certain changes, should be applied to the dividends accrued in 2017 for 2016 and previous years.
In order to improve the investment climate in Ukraine, the Law of Ukraine “On Amendments to the Tax Code of Ukraine Relating to the Improvement of the Investment Climate in Ukraine” of 21.12.2016 No. 1797-VIII (hereinafter − Law No. 1797) has made amendments to the TCU, in particular its pata.167.5, which establishes personal income tax rates for passive income, including dividends.
According to sec.3 of para.76 of the Law No. 1797 of TCU was added by the new sub-para. 167.5.4, which halved the PIT rate for incomes in the form of dividends on shares and/or investment certificates, corporate rights, accrued by non-residents, joint investment institutions and business entities that are not payers of the income tax. That is, those dividends to which 18% PIT rate was previously applied should be taxed now at a rate of 9% (18% ÷ 2). Recently, the Verkhovna Rada of Ukraine corrected the technical error that it made at the end of 2016 when adopting amendments to the TCU.
The PIT rate of 5% is left for taxation of dividends on shares and corporate rights accrued by residents − payers of the income tax (except for incomes in the form of dividends on shares, investment certificates that are paid by joint investment institutions).
Companies, other than joint-stock companies, can pay dividends to individuals both in cash and in kind. In case of payment of dividends to an individual in a non-monetary form, the base for taxation of PIT, according to para.164.5 of TCU, is the value of such income, determined at regular prices, taking into account the natural coefficient.
Deadlines for PIT payment
Peculiarities of payment of the personal income tax in the budget are set in para.168.1 of TCU. Banks accept payment documents for payment of income only under condition of the simultaneous provision of the settlement document for the transfer of personal income tax in the budget.
Therefore, the PIT payment to the budget occurs simultaneously with the payment of dividends.
In this case, if the dividends are provided in-kind or paid in cash from the cash of the company, PIT should be paid (transferred) to the budget within three banking days from the day following the date of such accrual (payment, provision).
If dividends are accrued but not paid, the amount of PIT to be withheld from such accrued income is subject to transfer to the budget by the company within 30 calendar days following the month of dividend payment.
The war tax
The war tax of 1.5% is also withheld and transferred to the state budget from the amount of dividends accrued to individuals, since it has the same taxation object as the personal income tax.
Thus, the founders − individuals will receive in their hands the amount of dividends, reduced by the amount of the personal income tax and the war tax.
