LETTER OF THE STATE TAX SERVICE OF UKRAINE

of September 25, 2012 No. 2343/0/51-12/17-1116

Concerning the taxation of the income of nonresidents

State Tax Administration of Ukraine, being guided by Art. 52 of the Tax code of Ukraine (further - the Code), considered the address concerning the tax discharge on the income of physical persons from the income received as a result of the inherited real estate by the physical person - the nonresident, and reports.

Concerning question of determination of the status of resident of Ukraine

According to subitem 14.1.122 of item 14.1 of Art. 14 of the Code for the purpose of the taxation the nonresident the physical person which is not resident is considered.

According to subitem 14.1.213 of item 14.1 of Art. 14 of the Code the physical person - the resident is physical person which takes the place of residence in Ukraine.

If the physical person takes the place of residence also in foreign state, it is considered resident if such person takes place of permanent residence in Ukraine; if person takes place of permanent residence also in foreign state, it is considered resident if has more close personal or commercial relations (the center of vital interests) in Ukraine. If the state in which the physical person has the center of vital interests cannot be determined or if the physical person does not take place of permanent residence in one of the states, it is considered resident if there are in Ukraine at least 183 days (including day of arrival and departure) during the period or the periods of tax year.

At the same time according to subitem 34.1.1 of item 34.1 of Art. 34 of the Code it is accurately determined that tax period is, in particular, calendar year.

Also according to subitem 14.1.213 of item 14.1 of Art. 14 of the Code sufficient (but not exclusive) condition of determination of the location of the center of vital interests of physical person is the place of permanent residence of members of his family or its registration as subject of business activity.

If it is impossible to determine the resident status of physical person, using the previous provisions of this subitem, the physical person is considered resident if it is citizen of Ukraine.

If contrary to the law the physical person - the citizen of Ukraine has also nationality of other country, then for the purpose of the taxation this tax such person is considered the citizen of Ukraine who has no the right to offsetting of the taxes paid abroad, provided by this Code or regulations of international agreements of Ukraine.

If the physical person is stateless person and provisions of paragraphs of the first - the fourth this subitem do not extend to it, then its status is determined according to rules of international law.

Good cause for determination of person by the resident is independent determination of the main residence by it in the territory of Ukraine according to the procedure, established by this Code, or its registration as self-employed person.

At the same time No. 2491 issued to the foreigner based on the Law of Ukraine of 07.06.2001 "About immigration" type on permanent residence in Ukraine is only permission to permanent residence in Ukraine and does not confirm the fact of residence (permanent residence) of the foreigner in Ukraine therefore it cannot be the document which confirms the resident status of the taxpayer in Ukraine. Therefore, the foreigner shall document the fact of the accommodation (stay in the territory of Ukraine over 183 days within calendar year).

Besides, the Code does not contain regulation concerning need of obtaining by foreigners from tax authorities of Ukraine of the documents confirming resident status of Ukraine. As the notary is person responsible for check of correctness of the tax discharge by the physical person - the foreigner, the obligation of determination of the status of resident of Ukraine at the taxpayer - the foreigner is assigned to the notary who certifies gift agreements, of purchase and sale of property, grants the certificate on inheritance.

At the same time according to subitem 170.10.4 of item 170.10 of Art. 170 of the Code by results of accounting tax year in which the foreigner acquired resident status of Ukraine it shall submit the annual tax declaration in which specifies the income with source of their origin in Ukraine and the foreign income.

Concerning the tax matter of object of inheritance which is inherited by the nonresident heir from the testator

According to item 162.1 of Art. 162 of the Code taxpayers on the income of physical persons are: the physical person - the resident who gains income as from source of their origin in Ukraine, and the foreign income, the physical person - the nonresident who gains income from source of their origin in Ukraine.

According to subitem "e" subitem 14.1.54 of item 14.1 of Art. 14 of the Code the income received with source of its origin from Ukraine is the any income gained by residents or nonresidents including from any kinds of their activities in the territory of Ukraine (including payment (charge) of remuneration by foreign employers), its continental shelf, in exclusive (sea) economic zone, including, but is not exclusive, the income in inheritance type.

The income in cost type of the property inherited or received as a gift in limits which is assessed with tax according to the Section IV of the Code is included general monthly (annual) chargeable income of the taxpayer according to subitem 164.2.10 of item 164.2 of Art. 164 of the Code.

The income assessment, means, the property inherited by the taxpayer as a result of acceptance by it or as a gift, the property or non-property rights, is regulated by Art. 174 of the Code which establishes several rates for the taxation of income of the taxpayer gained in the form of inheritance depending on degree of relationship of the heir with the testator and the resident status of the testator and the heir.

According to subitem "and" subitem 174.2.1 of item 174.2 of Art. 174 of the Code on zero rate is assessed with tax the cost of property which is inherited by members of the family of the testator of the first degree of relationship.

According to subitem 14.1.263 of item 14.1 of Art. 14 of the Code his parents, the husband or the wife, children including adopted are considered as members of the family of physical person of the first degree of relationship. Other members of the family of physical person are considered such which have the second degree of relationship.

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