Foreign companies – real estate owners in Ukraine do not need to establish representative office to pay land and real estate tax
Foreign companies are often used for possessing real estate in Ukraine.
In most cases such companies are not concerned with establishment and maintenance of representative office in Ukraine since it requires sufficient costs and care.
Such companies (real estate owners) lately have faced the problem: they were not able to pay real estate and land taxes. To pay the taxes, the payer should have been registered in Ukraine as a taxpayer and should have its own tax number. Tax officers emphasized in their explanations that in such cases the non-resident company need to establish a representative office in Ukraine or to transfer real estate into resident’s management under the management agreement, except real estate temporary possession which provided registration without representative office but under the evidence of such temporary possession. According to the Procedure of Tax and Fee Payer Registration approved by the Order of the Ministry of Finances of Ukraine No.1588 dd. 09.12.2011 (hereinafter referred to as the Procedure No.1588), a foreign company shall provide for tax registration “a documentary evidence that such company does not need to establish a representative office in Ukraine in order to obtain property and such property possession by foreign company is deemed as temporary with further alienation”. Of course foreign companies could not provide such evidence of temporary possession, so they were unable to pay tax without registration.
This issue was settled by the Law of Ukraine on Amendments to the Tax Code of Ukraine regarding decrease of the tax burden for taxpayers” No.655-VIII dd. 17.07.2015, published on August 12, 2015, valid from September 1, 2015.
Now Clause 64.5 of the Tax Code of Ukraine provides an opportunity of non-resident’s registration in case of obtaining proprietary rights on taxable real estate or land in Ukraine without establishing a special subdivision (permanent representative office) in Ukraine in order to obtain property in possession.
Such non-resident shall provide to the tax authority under real estate object location the following set of documents required for tax registration:
- Application - approved form;
- Apostilled (legalized) copy of the extract from trade register of the company’s registration country (certificate of registration or other similar document) with notarized translation;
- Notarized copy of real estate documents;
- Representative’s personal data.
As we can see, it is the minimal and the exhaustive list of documents. Tax registration of foreign company has been simplified fully.
The essence of innovation is that the list of documents does not include documentary evidence that “such property possession by foreign company is deemed as temporary with further alienation”, as provided previously by the Procedure No.1588.
In practice development of such a positive change implementation mechanism (approval of the application form, amendments to the Procedure No.1588) will probably take some more time. The positive step is that the legislation has fixed the procedure facilitating real estate possession by foreign companies without any additional and groundless costs.