Fulfillment of the condition of non-payment of dividends by a resident of Diia City

From what date should two consecutive calendar years be counted in order to fulfill the condition of non-payment of dividends on shares or other corporate rights, if the issuer of corporate rights - a resident of Diya City, switched to taxation as a resident of Diya City of the taxpayer on special conditions from the middle of the year?

The procedure for personal income taxation of dividends is provided for in clause 170.5 of the TCU, according to which, in accordance with clause 170.5.1, the tax agent of the taxpayer when accruing dividends in his favor, except as provided for in clause 165.1.18 of the TCU, is the issuer of corporate rights or another person who makes such accrual on his behalf.

Any resident who accrues dividends, including those who pay corporate income tax in a manner different from the general taxation system (subject to the simplified taxation system) or are exempt from paying such tax for any reason, is a tax agent when accruing dividends (sub-clause 170.5.2 of the TCU).

The income referred to in clause 170.5 of the TCU is finally taxed by the tax agent when it is accrued to the taxpayer at the rate specified in clauses 167.5.1, 167.5.2 and 167.5.4 of the TCU (clause 170.5.4 of the TCU).

At the same time, dividends accrued in favor of the taxpayer by an issuer of corporate rights that is a resident of the Diia City - a taxpayer on special conditions, provided that such a resident of the Diia City - a taxpayer on special conditions has not paid dividends on shares or other corporate rights for two consecutive calendar years, are not included in the calculation of the total monthly (annual) taxable income of the taxpayer (sub-clause 170.5.5 of the TCU).

In addition, the said income is subject to military duty (subpara. 1, para. 1.2, para.¹⁶¹, subsection 10, section XX "Transitional Provisions" of the TCU).

The rate of the military fee is 5 percent of the taxable object specified in sub-clause 1 of clause 1.2 of clause¹⁶¹ of subsection 10 of section XX "Transitional Provisions" of the TCU (sub-clause 1 of clause 1.3 of clause¹⁶¹ of subsection 10 of section XX "Transitional Provisions" of the TCU).

Sub-clause 1.7 of clause^{161 of subsection} 10 of section XX "Transitional Provisions" of the TCU provides that income that is exempt from military taxation in accordance with section IV of the TCU and subsection 1 of section XX "Transitional Provisions" of the TCU is exempt from taxation by military fee. XX "Transitional Provisions" of the TCU are not included in the total taxable income of individuals (not subject to taxation, taxed at a zero rate), except for the income specified in subpara. 165.1.36, subpara. 170.¹³¹.3 and 4 of the TCU and para. 14 of subpara. 1 of section XX "Transitional Provisions" of the TCU.

We note that the concept of "calendar year" is not specific, but is used in a general sense, in particular, the courts define it as a period of time starting from January 1 and ending on December 31, which lasts 365 or 366 (in a leap year) calendar days.

In addition, a Diia City resident - a taxpayer paying corporate income tax on special terms (hereinafter referred to as a Diia City resident - a taxpayer on special terms) - is a Diia City resident who has chosen or switched to the appropriate taxation regime in accordance with the procedure provided for in clause 141.10 of the TCU. Residents of Diia City who have not chosen (have not switched) to the appropriate taxation regime pay corporate income tax on a general basis and are considered residents of Diia City who are not taxpayers on special conditions (sub-clause 14.1.²⁸²¹ of the TCU).

Taking into account the above, if a taxpayer is registered as a resident of Diya City - a taxpayer on special conditions from the middle of the year, and the calendar year starts from January 1 to December 31 inclusive, then in order to fulfill the condition of not paying dividends on shares or other corporate rights, two consecutive years are deducted starting from January 1 of the year following the year in which such a taxpayer switched to taxation as a resident of Diya City - a taxpayer on special conditions.