We provide comprehensive legal services and accounting support procedures for payment of dividends and distribution of profits made by Ukrainian corporations.
Distribution of profits is one of the most expected stage for investors and shareholders of any company. Probably this is what for the most of businesses are established. So if you do own a company in Ukraine, and that business is profitable, you need to know exactly all the processes of this stage. Although if the profit was cleared from corporate tax, that funds can be used to increase the future revenue of business.
Dividend payment — is a stage of distribution of profits among the owners/shareholders (or members by Ukrainian law). The right of shareholders to participate in the distribution of company profits is determined by article 116 of the Civil Code of Ukraine and article 88 of the Commercial Code of Ukraine. Detailed of dividend payment shall be regulated by company’s articles of association or memorandum of association.
How frequently dividends can be paid?
By Ukrainian law dividend payment is possible after the declaration of company’s income or profit to the fiscal/tax authorities and the approval of the income statement. Thus, regardless of the tax system business can make dividend payments no more than 4 times a year, or one time a quarter.
The procedure of dividend payment in Ukraine
Dividend payment procedure can be started by company`s supreme body (general meeting of shareholders, owners) and only after it’s decision. But such decision can be approved only if the balance (a statement) has been provided to state authority. Payments are distributed in proportion to the shares. Payment can be carried out both in cash and in the property. Only shareholders that have done their contribution to share capital of the company do have the right for dividends. Only cashless money payment is possible. Is the owner of the company is a foreign company or individual, profit can be transferred in foreign currency. Althoug there are some restrictions of National Bank of Ukraine, but still such transaction is possible. Taking decision on profit distribution shareholders can decide the final term for transaction to be completed.
Taxation on corporate profit distribution and Ukraine dividend tax rates
Dividend tax is a passive income tax. Upon payment of dividends for individuals, the Company acts as a tax agent. Company is responsible to hold and to transfer taxes on dividends to Ukrainian budget (p. 170.5.2. Art. 170 of the Tax Code of Ukraine). Dividends are not taxable (p. 196.1.6 Art. 196 of the Tax Code of Ukraine) by value added tax (VAT).
Tax rates for individuals depends on company’s tax system. There are two tax rates:
- 5% of amount – if company is an income tax payer (par. 5.2. art. 167 of the Tax Code of Ukraine);
- 9% of amount – if company is single (or fixed) tax payers (par. 5.4. art. 167 of the Tax Code of Ukraine).