Is it possible to establish the loss of Ukrainian tax residency status through court?

Waiting for the tax authority to file a claim or for grounds to arise for independent filing (option 1)

This scenario arises when the tax authority identifies a violation or when the taxpayer disputes imposed penalties. Consequently, a court claim may be filed, and during the proceedings, it might be possible to argue the loss of Ukrainian tax residency status.

However, raising the issue of lost residency status is reasonable only if it is directly connected to the subject matter of the dispute. For example, suppose the tax authority imposes a fine for failing to file a CFC report. In that case, you may disagree, arguing that you are a resident of another country and, therefore, not obligated to report under CFC rules. Since CFC obligations apply specifically to Ukrainian residents, this situation could warrant examining whether residency status was, in fact, lost.

In such cases (whether you file a claim or receive one from the tax authority):

1. Timing is unpredictable: The tax authority may conduct an audit and identify violations either soon or several years later. A claim could, therefore, arrive unexpectedly, leaving limited time to prepare evidence.
2. Relevance of residency status may vary: The tax authority’s claims could relate to business activities as a sole proprietor or other matters connected to your previous status as a Ukrainian resident and taxpayer. In such instances, the loss of residency status may not be relevant or considered by the court.
3. Tax disputes can be lengthy: Litigation with tax authorities tends to be a prolonged process.

For those who are unwilling to wait and wish to prepare systematically in advance, there is Option 2.

Filing a court application to establish the fact of losing Ukrainian resident status and acquiring non-resident status (Option 2)

This is a separate category of cases unrelated to establishing tax law violations or appealing tax decisions in court. Such an application deals exclusively with establishing the fact of losing Ukrainian resident status and acquiring non-resident status. The tax authority participates in the proceedings, along with other interested parties (e.g., the National Bank, the State Customs Service, etc.).

Supporting documents and their notarized translations must be attached to the application. These may include evidence demonstrating the applicant has severed ties with Ukraine, no longer meets the criteria for determining Ukrainian tax residency, and identifies as a non-resident. Such evidence may include proof of termination of entrepreneurial activities in Ukraine, sale of shares in legal entities, sale of real estate (e.g., extracts, registry records, deeds, etc.), a residence permit and rental agreement in another country, proof of registration of a legal entity or business activity abroad, a certificate of consular registration, a valid certificate of temporary protection, and so on.

A court fee is charged for applying to establish the facts. As of 2024, the cost is 605.60 UAH (0.2 of the subsistence minimum for one able-bodied individual).

Applications to establish such facts are considered, on average, within 1-3 months from the date of case initiation. However, preparatory work must be completed before submitting the application to the court. Specifically, this involves preparing and certifying document translations, submitting a request to the tax authority, and filing a petition with the Supreme Court to determine jurisdiction.

The advantage of filing such an application is that you can determine the timing of approaching the court, and the review process is relatively quick.

The downside is that obtaining a court decision based on the application is not always possible. Courts often refuse to initiate proceedings, and the applications remain unconsidered. This is because most courts adhere to the established practice of the Supreme Court, which stipulates that the issue of establishing the fact of losing residency status should be addressed according to Option 1, i.e., within the framework of a dispute with the tax authority.

However, some courts deviate from the Supreme Court’s legal position and approve such applications. Consequently, they confirm the fact of losing Ukrainian resident status and acquiring the status of a non-resident citizen of Ukraine.

In these cases, the loss of status is justified by factors such as living abroad, obtaining a residence permit, consular registration, purchasing real estate in another country, employment with a foreign company, and other circumstances.

Conclusions

Yes, the fact of losing Ukrainian resident status can be established through court proceedings. There are two possible approaches: the first involves resolving a dispute related to tax law violations or appealing tax decisions; the second consists of filing a separate application to establish the fact of losing residency status. Each approach has its own specifics and procedural requirements.

If you are interested in establishing the loss of residency status, we would be happy to answer additional questions, review your case, and provide tailored recommendations during a consultation.