The nuances of determining dividends
Can a taxpayer equate dividends, which are defined in Article 10 of the Convention, and income that is equated to dividends for tax purposes in accordance with paragraphs 5 and 6 of subparagraph 14.1.49 of the TCU?
If income equated to dividends by the Tax Code is paid in favor of a person who is a tax resident of a state with which an international treaty has been concluded, the relevant income is subject to non-resident income tax, taking into account the rules of the international treaty. The relevant international treaties apply if the non-resident meets all the conditions for obtaining the benefits provided for in the relevant article (relevant clause) of such international treaty.
If an international treaty establishes rules other than those provided for by the Code, the rules of the international treaty shall apply (Article 3.2 of the TCU).
The principle of precedence of international treaty provisions over domestic legislation, enshrined in Article 3 of the TCU, is applied to the classification of income paid to a non-resident of Ukraine for the purposes of taxation with respect to non-resident income tax (if the income recipient is a resident of a country with which the applicable international treaty has been concluded). Therefore, the rules of the international treaty article on dividends (Article 10 or similar article regulating the taxation of dividends) may be applied to income equated to dividends by the TCU, if the taxation of the relevant income as "dividends" does not contradict the rules of the relevant articles of the international treaty.
Existing international treaties mostly have a standard structure based on models (model treaties) developed by international organizations that coordinate international tax policy. The vast majority of Ukraine's existing international treaties are based on either the Model Tax Convention on Income and Capital of the Organization for Economic Cooperation and Development (OECD) or the Model Double Taxation Convention of the United Nations (UN).
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