The State Fiscal Service of Ukraine has provided clarifications regarding the taxation of royalties from a Ukrainian company in favor of a resident of Poland.

The Convention between the Government of Ukraine and the Government of the Republic of Poland on the avoidance of double taxation of income and property and on the prevention of evasion entered into force on 11 March 1994.

Payments made by a resident of Ukraine to a resident of Poland as compensation for the use or the right to use industrial/commercial equipment, which are royalties within the definition of item 3 of Art. 12 of the Convention is subject to taxation in Ukraine at the rate of 10% of the total amount of receipts in accordance with paragraph 2 of Art. 12 of the Convention.

The basis for exemption (reduction) from taxation of income with source of their origin from Ukraine is the submission by a non-resident, taking into account the features stipulated in clauses 103.5 and 103.6 of Art. 103 of the Tax Code, to the person (tax agent) who pays him the income, a certificate (or a notarized copy thereof) confirming that the non-resident is a resident of the country with which the international agreement of Ukraine is concluded, as well as other documents, if provided for by the international treaty Ukraine (para. 103.4 of art. 103 of the Code).

In case of non-submission of a certificate by a non-resident in accordance with clause 103.4 of Article 103 of the Code, the income of a non-resident with their source of origin from Ukraine shall be taxed in accordance with the legislation of Ukraine on taxation matters (clause 103.10 of Article 103 of the Code).