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Some issues regarding the taxation of remuneration of lecturers from Ukraine for the services provided at the conference

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How to deal with a non-resident if he/she has decided to pay a fee to a conference lecturer in Ukraine through a hotel? What are the tax implications for non-residents and hotels see below in our two questions/answers.

Question 1: Is it possible to transfer money via the hotel to lecturers as payment for their services, and which tax liabilities of a non-resident do arise in this situation?

Answer 1: Pursuant to applicable civil laws of Ukraine, non-residents can pay for the services of a person-resident (lecturer) through the agency of the legal entity – resident of Ukraine (hotel) by means of entering into respective agreements (for instance, intermediary agency agreement, Article 1000 of the Civil Code of Ukraine, hereinafter – CCU).

To pay for the services of the lecturer in the mentioned agency agreement it is necessary to provide for the obligation of a non-resident of UST (principal) to transfer the respective amount of remuneration of the lecturer to the hotel’s account and the obligation of the hotel (attorney) to pay the remuneration to the lecturer on behalf and at the cost of the principal. 

Under these circumstances the hotel will act as a tax agent (sub-clause 14.1.180 of Article14, clause 18.1, sub-clause 168.1.1 of Article 168 of the Tax Code of Ukraine, hereinafter - TCU) of the lecturer regarding the income generated from the lecturer activity in Ukraine, in other words, shall charge, withhold, and pay personal income tax to the respective budget on behalf of and at the cost of the taxpayer – lecturer, as well as perform other obligations of the tax agent pursuant to clause 176.2 and sub-clause 49.18.2 of Article 49 of TCU.

A non-resident does not bear tax liabilities (personal income tax) from the income of the lecturer in the described situation.

The official position of the State Tax Service of Ukraine on this issue has not been published.

Question 2: What official documents can confirm that a non-resident does not have tax liabilities in Ukraine?

Answer 2: Decree of the State Tax Service in Ukraine dated 10.10.2013 No.567 approved the Procedure for issue of the certificate on absence of tax liabilities controlled by state tax authorities (hereinafter referred to as Procedure).

The certificate is issued free of charge on the basis of the application of the taxpayer on receipt of the Certificate (clause 3 of the Procedure).

In case a non-resident of Ukraine is a legal entity that does not run business in Ukraine and does not generate income with the source in Ukraine and does not have its permanent representative office in Ukraine it is not a personal income tax agent, and, accordingly, it is not a taxpayer in Ukraine, and, therefore, we consider it is not entitled to receive the mentioned certificate.

The official standpoint of the State Tax Service of Ukraine of this issue has not been published and is not known.

Besides, please note that employees of the "hot line" of the State Tax Service of Ukraine in a telephone conversation (tel. 0-800-501-007, http://sts.gov.ua/feedback) notified that there is not a legislative act which would define the form of the certificate of the established form with to give it to a non-resident with a view of confirmation of the payment of tax in Ukraine. 

At the same time, according to sub-clause 14.1.172 of Article 14 and Article 52 of TCU, there is a right for taxpayers to apply to the state tax authority with the individual written request to provide free of charge a written consultation on practical use of separate statutory tax regulations. A person-lecturer may turn with this request to receive the individual consultation regarding the absence for a non-resident of Ukraine a legal company of obligations of the tax agent on income paid to the lecturer in Ukraine.

The period of provision of the written consultation by the tax authority – 30 calendar days following the date of receipt of this application from the taxpayer.

Kind regards,
Romana Shchur
Attorney/Lawyer
LLP Ukraine

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