Tax residency in Ukraine – acquisition and loss

Acquisition of tax residency status in Ukraine

The Tax Code of Ukraine defines specific criteria for tax residency. If an individual meets these criteria or even one of them, they can be considered a tax resident of Ukraine.

These criteria include:

• Place of residence in Ukraine;
• Permanent residence in Ukraine;
• Center of vital interests (personal and economic ties);
• Staying in the country for at least 183 days;
• Registration as a sole proprietor;
• Citizenship.

Official documents confirm the status of a tax resident in Ukraine. In Ukraine, such an official document is a certificate confirming the status of a tax resident of Ukraine, which is issued to avoid double taxation according to international treaties.

This certificate is issued by the Ukrainian tax authorities and confirms that an individual is (or was) a taxpayer in Ukraine and a resident of Ukraine.

In addition to the certificate, keepingher evidence of Ukrainian residency be is recommended kept. Based on the tax residency criteria, such evidence may include:

• Permanent housing (property ownership certificates, purchase and sale agreements for apartments/houses, long-term rental agreements, utility bills, proof of residence registration, extracts from the demographic register);
• Periods of stay (passport for international travel, transport tickets with departure/entry stamps to Ukraine);
• Family and personal ties (birth certificates, marriage certificates, children’s birth certificates, etc.);
• Economic ties (service or work contracts, extracts from the register of legal entities, individual entrepreneurs, and public organizations, charters, minutes of general meetings of participants, appointment orders, employment contracts, extracts, and statements from tax registers, tax returns, bank statements, insurance payment certificates, royalties, dividends, etc.);
• Other life circumstances (any certificates, statements, extracts, credentials, and other documents).

The list of evidence is indicative and may vary depending on each situation.

Thus, you will have proof of a legal connection with Ukraine, confirming that Ukraine is your country of tax residency. Accordingly, all tax obligations (filing declarations, reports, paying taxes) must be fulfilled in Ukraine.

Loss of tax residency status in Ukraine

Ukrainian legislation does not provide a procedure for confirming the loss or revocation of tax residency status or acquiring non-resident status. Additionally, no specific document serves as proof of such a fact.

However, under certain circumstances, it can be considered that an individual has lost their tax residency status in Ukraine. This most commonly occurs when:

• There is a conscious choice to reside in a foreign country;
• Documents are prepared to obtain permanent residence and/or residency or citizenship status in a foreign country.

Confirmation of the loss of legal ties with Ukraine may include:

• Termination of any obligations in Ukraine (contracts, payment of utility bills, etc.);
• Sale of real estate;
• Sale of corporate rights and/or liquidation of legal entities or sole proprietorships (FOP);
• Liquidation of a sole proprietorship (FOP);
• Submission of the “final” tax declaration and obtaining a certificate of tax payment confirming the absence of debt;
• Deregistration of residence in Ukraine;
• Obtaining a visa or residence permit in another country;
• Obtaining permission to leave Ukraine for permanent residence in another country;
• Deregistration from military records in Ukraine;
• Consular registration at the consulate of another country.

Procedural aspects of losing tax residency status in Ukraine: judicial practice

In practice, two possible ways exist to prove the loss of tax residency status in Ukraine. However, it is essential to note that this is not a separate particular procedure but rather confirmation through a court process.

Option 1 – within the framework of a court case concerning the non-fulfillment of tax obligations or unlawful tax decisions. This position is outlined in the Resolution of the Grand Chamber of the Supreme Court dated January 23, 2019, in case No. 536/1039/17.

For example, if the tax authority files a lawsuit to recover unpaid taxes, you disagree with these claims because you consider yourself a tax resident of another country. Therefore, in court, you need to prove that the loss of tax residency status in Ukraine has occurred.

Alternatively, if you believe the tax authorities’ decisions are unlawful because you are not a tax resident of Ukraine, you can file a lawsuit to annul the tax decisions. In this case, you must also justify why you believe this and confirm your non-resident status in Ukraine.

Option 2 – in a separate court proceeding, establish the fact of losing Ukrainian residency and acquiring non-resident status.

Most courts refuse to consider such cases in this manner because there is no procedure for establishing these facts. According to the Supreme Court’s position, such issues are addressed within cases related to violations of tax legislation.

An example of this is the ruling of the Shevchenkivskyi District Court of Kyiv dated May 3, 2023, in case No. 761/14607/23. The applicant requested the court establish that from October 14, 2022, to April 15, 2023, they permanently resided in Vienna, Austria, for more than 183 days and thus lost their tax residency status in Ukraine and acquired the status of a non-resident citizen of Ukraine. However, the court refused to initiate proceedings and consider the case.

Nevertheless, there are isolated cases where courts consider such matters and establish the fact of losing Ukrainian residency and acquiring non-resident status. For example, the decision of the Pecherskyi District Court of Kyiv dated January 15, 2024, in case No. 757/50930/23-ts.

The applicant argued that since 2022, they have been living in the United Kingdom with their family, where they obtained a residence permit and a driver’s license, own property, and work as directors of companies from which they receive a salary. They spent only 39 days in Ukraine in 2022 and did not cross the Ukrainian border at all in 2023, thus having their center of vital interests in the United Kingdom.

It should be noted that this decision has not come into legal force, as an appeal has been filed.

Conclusions

It is crucial to determine which country considers you its tax resident. This will help you understand where to declare your income, pay taxes, and how to avoid double taxation.

If needed, our lawyers can assist you in analyzing the tax residency criteria of Ukraine and your country of residence. This will help determine your tax residency status and develop a tax strategy tailored to your situation.