The following type of income earned by non-residents from Ukrainian sources attract withholding tax at 15% rate: interest; dividends; royalties; payments for engineering services; rental (leasing) income from property; income from the disposal of real estate located in Ukraine; gains from securities trading or sale of other corporate rights; income earned by an un-incorporated joint venture in Ukraine; income from long-term contracts; fees from cultural, educational, religious, sporting and entertainment activities; broker's or agent's fees in respect of services performed in Ukraine; insurance and reinsurance payments; income from lotteries and gambling business other than the state lottery; charitable donations payable to non-residents; other income from business activity in Ukraine except for sums payable to non-residents for goods or services supplied to Ukrainian residents.
Gains earned by non-residents from transactions with discounted bonds and treasury bills are subject to withholding tax at the rate of 25%.
Income from freight services is subject to withholding tax at 6% rate.
Resident entities that pay non-residents for advertising services performed in Ukraine have to pay to the state, from their own funds, a 20% tax based on value of such services. Effectively such tax is levied on a resident rather than on non-resident, which means that a double tax treaty cannot be used to avoid such tax.
Ukrainian residents must pay 3% tax based on value of insurance or re-insurance payments to foreign insurers or re-insurers if rating of financial reliability of such insurers or re-insurers does not meet requirements set by the Cabinet of Ministers of Ukraine.
Income from government bonds sold by authorized agents abroad and interest on loans granted to the government by non-resident creditors are exempt from withholding tax.
Ukrainian withholding tax can be reduced or avoided under a relevant double taxation treaty. The procedure for the application of double tax treaties allows advance reduction of the withholding tax rates, provided the Ukrainian payer of income obtains from the income recipient its residence certificate issued by the authorities of the treaty country. Where the certificate of residence is issued in a form prescribed by legislation of the treaty country it must be properly legalized (apostilled) and translated into Ukrainian language. The certificate is valid for the calendar year of its issuance.
For payment of interest between Ukrainian and foreign banks, the residence in the treaty country is evidenced by the excerpt from the "International Bank Identifier Code" (S. W. I. F. T., Belgium & International Organisation for Standardisation, Switzerland).
A non-resident that suffered excessive tax in Ukraine should apply to the tax authorities where the payer of income is located with the standard application and the residence certificate issued by the authorities of the treaty country. If the application is accepted, the state treasury of Ukraine will remit the relevant amount (in Hryvnia) to the Ukrainian entity that collected tax, which in turn must remit it (in the relevant currency) to the non-resident that applied for the refund.
