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The Cabinet of Ministers of Ukraine (hereinafter -the "CMU") amended the Order of payment of pension duty from certain business transactions (hereinafter - the "Order") by its Resolution dated 3 February 2010 No. 202 (hereinafter -the "Resolution"). The Resolution cancels the Order's provision which foresees 0.2% pension duty on purchase of foreign currency. Instead, the Resolution envisages that the pension duty is levied "at the rate established by the law".

The CMU thereby indicates that 0.5% rate stipulated by the Law of Ukraine "On obligatory state pension insurance duty" (hereinafter -the "Law") shall apply to the mentioned transactions, but not the reduced 0.2% rate established by the 2009 Budget Law. 

As we have already informed, the Pension Fund of Ukraine had previously expressed its view stating that the provision of the Law envisaging the 0.5% rate should apply since the 2010 Budget Law has not been adopted.  At the same time, based on the on subclause 4 of article 46 of the Budget code of Ukraine, whenever a budget law is not enacted as of the beginning of a fiscal year taxes are levied based on the budget for the previous year and other statutory acts. Therefore, an alternative interpretation is possible meaning that until adoption of the 2010 budget 0.2% pension duty rate should apply as established by the Budget Law 2009. 

In our opinion, the amendments introduced by the Resolution do not eliminate the ambiguity concerning the applicable rate of pension duty on purchase of foreign currency. In addition, the Budget Law 2009 overrides the CMU's Resolution. In practice this issue will most probably be resolved depending on the position of a specific servicing bank.

The amendments, introduced by the Resolution, came into effect on 9 March 2010. 


The State Tax Administration of Ukraine (hereinafter -the "STAU") by its letter No. 4676/7/10-1017/770 as of 5 March 2010 (hereinafter - the "Letter") revokes a number of letters, including the summary letter on taxation of income of foreigners and non­residents No. 28593/7/17-0717 dated 23 December 2009 (hereinafter - the "Summary Letter"). In the Summary Letter the STAU insists on applying 30% personal income tax rate. In order to become eligible to the 15% rate, a foreigner must formally declare its Ukrainian residency to the tax authorities which would then issue the relevant certificate to its employer. 

The withdrawal of the Summary Letter means that the definition of tax residency status and taxation of foreigners should solely be based on provisions of the Law of Ukraine "On Personal Income Tax" (hereinafter - the "PIT Law").

Based on the provisions of the PIT Law, obtaining the status of a tax resident of Ukraine depends on the occurrence of criteria set of in para 1.20.1 of the PIT Law. At the same time, the PIT Law does not stipulate the individual's obligation to receive any confirmation of residency status through notifications or certificates from the tax authorities. 

Please do not hesitate to contact us should you have any questions on the above.

DLA Piper Ukraine – Tax team:
Svitlana Musienko, Legal Director, Head of Tax
T +380 44 490 9564 E svitlana.musienko@dlapiper.com
Yulia Logunova, Senior Associate
T +380 44 495 1787
E yulia.logunova@dlapiper.com
Illya Sverdlov, Senior Associate
T +380 44 490 9575 E illya.sverdlov@dlapiper.com
Anna Demchenko, Associate
T +380 44 490 9575 E anna.demchenko@dlapiper.com
Dmytro Donets, Associate
T +380 44 490 9575 E dmytro.donets@dlapiper.com
DLA Piper Ukraine LLC is part of DLA Piper, an international legal practice.
International Law Firm of the Year 2008 in Ukraine.
Kyiv switchboard: +380 44 490 9575

The matters covered in this newsletter are intended as a general overview. This newsletter is not intended, and should not be used, as a substitute for taking legal advice in any specific situation. DLA Piper Ukraine LLC will accept no responsibility for any actions taken or not taken on the basis of this newsletter. If you would like further advice, please contact Tax Team at +380 44 490 9575.

LINK EN: http://www.usubc.org//reports/TAX_Newsletter_March 2010_ENG.pdf"
LINK RU: http://www.usubc.org//reports/TAX_Newsletter_March 2010_RUS.pdf"
LINK UA: http://www.usubc.org//reports/TAX_Newsletter_March 2010_UKR.pdf"