Taxes on investment assets: how much we pay on the purchase and sale of shares and dividends

Опубликовано: 16.03.2021

More and more Ukrainians are mastering earnings on foreign stock exchanges. For example, in seven months of 2020, 60% more citizens opened e-limits for operations in foreign banks than in the whole of 2019. But, having earned on foreign shares and dividends, you will have to pay taxes in Ukraine.

Everyone who invested in shares last year and made money on them will have to report to the tax authorities. You need to highlight what you have earned not only in Ukraine, but also on foreign stock exchanges. To do this, at the place of registration, you need to submit a declaration of property status and income. This must be done before May 1.

If the tax is paid independently (another option is done by a tax agent, for example, your broker), you need to pay off the budget before August 1. Now let’s take a closer look at how much and who will have to pay.

Tax rates

So, in transactions of purchase and sale of shares, the tax is paid on the investment profit. It is calculated as the positive difference between the income received from the sale of an investment asset (in our case, a stock) and its value.

The value of the shares is determined from the amount of the confirmed acquisition costs.

We pay from the investment profit:

Personal income tax – 18% and military tax – 1.5%.

Some companies pay dividends. They also need to pay tax.

When paying dividends by companies-residents of Ukraine, which are subject to the general taxation system (except for dividends paid by joint investment institutions), we pay:

Personal income tax – 5% and military tax – 1.5%

If dividends are paid by a non-resident company, joint investment institutions and resident companies of Ukraine, which are under the simplified taxation system, we pay:

Personal income tax – 9% and military tax – 1.5%

If the taxpayer owns preference shares, the tax will be withheld at 18% personal income tax plus 1.5% military duty.

Payment of dividends is not subject to a unified social contribution.

How to calculate

It is easy to calculate the tax on income from the sale of shares in Ukraine: we subtract the cost of purchasing it from the amount received from the sale of a share. From the obtained result and pay personal income tax “plus” the military fee.

But if the income is received, say, from the sale of BMW or Tesla shares on the Nasdaq or NYSE, you will have to sweat with determining the tax base.

For this case, a similar rule applies: the investment profit is calculated as the positive difference between the income received by an individual from the sale of a separate investment asset, taking into account the exchange rate difference, and its documented value. The procedure for taxing investment profits is regulated by clause 170.2. of the Tax Code.

If you do not have documents confirming the expenses for the purchase of the share, the investment profit will be calculated not from the difference, but from the amount received from the sale of the share.

“The documentary confirmation (primary document) of income and expenses on operations with investment assets concluded in electronic form on the stock exchange for clients – participants of the stock exchange, is the report of a securities trader (broker). It is formed on the basis of a stock exchange report and an agreement for brokerage services, ”says Dmytro Onosovskyi, senior lawyer of De Jure UCC.

However, until now, the tax authorities have often ignored this rule and, when determining the tax base, have applied a different rule of the Tax Code – pp. 170.11 “Taxation of foreign income”.

Referring to it, they included in the taxable income not the difference between income and expenses for the purchase of shares, but the entire amount received from the sale of the securities.

The law 466-IX put an end to this history of tax creativity. The changes he made to the Tax Code clearly defined: tax should be exactly the positive difference between the sale price and the purchase price of a foreign share, taking into account the exchange rate difference.

But the corresponding noma began to operate on May 23 last year. This means that when determining the income from investment activities for the last year, the fiscal authorities can still present an unpleasant surprise.

The K.A.C. experts calculated the tax on the sale and purchase of shares for the Ministry of Finance. Group.

So, let’s say on March 2, 1 share was purchased for $ 100. The official exchange rate of the NBU for this date was UAH 24.7 / $. On November 2, the share was sold for $ 130. NBU official rate – UAH 28.4 / $

You need to pay 18% of personal income tax + 1.5% of the military fee

We determine the tax base:

(130 X 28.4) – (100 X 24.7) = 1222 UAH. profit

Personal income tax 18% – UAH 219.96

Military tax 1.5% – 18.33 UAH

Total taxes: 238.29 UAH

The same logic should be applied in the event that a share was purchased and sold prior to the entry into force of a new clarifying provision of the Tax Code. But it is possible that in this case the tax authorities will recalculate the amount of mandatory payments in their own way.

We take the same share purchased on March 2 for $ 100 at the official NBU rate of UAH 24.7 / $. The same share was sold on May 10 for the same $ 130 at the official NBU rate of UAH 26.8 / $

The tax calculation may look like this:

(130 X 26.8) = 3484 UAH. profit

Personal income tax 18% – 627.12 UAH.

Military tax 1.5% – 52.26 UAH.

Total taxes: UAH 679.38.

In fact, the calculation of the amount of taxes, and in this case, should look like this:

(130 X 26.8) – (100 X 24.7) = 1014 UAH. profit

Personal income tax 18% – UAH 182.52.

Military tax 1.5% – 15.21 UAH.

Total taxes: UAH 197.73.

To calculate the investment income for the year, it is necessary to subtract all purchase costs from the profit received from the sale of all shares during this period.

“The funds received by the taxpayer from the sale of investment assets, if the amount did not exceed UAH 2840 in 2020, are not subject to declaration and are not included in the total annual taxable income,” clarifies the lawyer of the Leshchenko, Doroshenko and Partners Lawyers Association Iryna Smityukh.

The non-reporting amount is equal to the tax social benefit. It is calculated as the product of the subsistence minimum on January 1 of the reporting year and the coefficient 1.4, rounded to the nearest UAH 10.

As of January 1, 2020, the subsistence minimum was UAH 2027.

2027 X 1.4 = 2837.8 UAH, round up to 2840 UAH.

“If the contract for the sale and purchase of an investment asset (securities) is concluded in the reporting year, and the proceeds from its sale will actually come in the next year, then income must be declared in the form of investment profit in the year in which such income was actually received. A similar approach is used in cases of partial receipt of funds over several years when selling an investment asset, ”said Igor Reutov, head of the department, attorney at Gramatskyi & Partners.

Of course, there are times when the work on the stock exchange brought the investor not profit, but losses. What to do in this case?

“If a taxpayer has received an investment loss, it must be reflected in the tax return. When filing a declaration next year, this investment loss will reduce the financial result until it is fully paid off. Receiving an investment loss does not exempt the taxpayer from filing a tax return for the reporting year, ”says Artur Mriglod of Moris.

When you don’t have to calculate tax

In most cases, Ukrainians enter foreign exchanges through Ukrainian brokers. And they (if registered in Ukraine) are tax agents.

“The tax agent himself determines the amount of investment profit from operations with securities, withholds the necessary taxes from this amount and displays information on income and withholding taxes in the form of 1 DF. The tax agent will not indicate the investment loss in this form. Also, he will not adjust the profit for the losses of previous years, ”says Irina Smityukh from the Leshchenko, Doroshenko and Partners Law Office.

The payment of taxes by a tax agent does not exempt from the obligation to file a tax return. By the way, it is also profitable for those whose game on the stock exchange was unprofitable in one year or another. After all, otherwise it will not be possible to adjust the current profit for the losses of previous years.

To pay or not to pay

Many people have a reasonable question: is it worth publicizing their foreign earnings, paying taxes, and can our fiscal officials find out about this secret?

The arguments “for” and “against” were presented by senior partner K.A.C. Group Tetiana Kuzmych.

So, our legislation does not oblige the investor:

  • report on the movement of funds in foreign accounts,
  • receive e-declarations for any reinvestment at the expense of funds outside Ukraine,
  • automatic exchange of tax information with other jurisdictions (CRS) has not been adopted at the legislative level in Ukraine.

However, the Tax Code obliges citizens to pay tax on income, including foreign ones.

If you received income and paid tax in a country that has entered into a convention with Ukraine for the avoidance of double taxation, then this payment can be credited in our country as payment of personal income tax. For example, when paying dividends to foreign companies, local brokers automatically withhold taxes.

You can, of course, not pay tax in the hope that our fiscal authorities will not unearth foreign revenues. And so far, the Ukrainian tax authorities really fail to cope with this task. But the situation may change radically very soon. Then the whole history of foreign income of the Ukrainian payer will appear at the disposal of our fiscal authorities.

The general limitation period for administration is 3 years, which makes it possible to charge additional charges within this period. Ukraine may join the system of automatic exchange of information as early as next year.

An unfair investor can be held administratively liable for failure to file an annual declaration. And if the tax authorities independently charge the payer with the amount of obligations that he had to declare and pay on his own, the amount of the fine payable will be 25% of the amount of the additional tax.

If the violation turned out to be repeated (for example, the declaration was not submitted for two years in a row, and the obligations to pay personal income tax and the military fee were not fulfilled), the amount of such a fine will be 50% of the amount of additional charges.

It is also worth remembering about criminal liability for tax evasion under Article 212 of the Criminal Code, the threshold amount of which is currently over UAH 3 million.

Do not forget that tax authorities can obtain information about your income not only from tax agents and in the future from their foreign colleagues, but also from subjects of financial monitoring.

And these include: notaries, brokers, professional traders, consultants, lawyers, accountants. This means that control over the passage of a transaction exceeding the amount of the threshold indicator (today in Ukraine it is 400 thousand UAH) is already under three or more supervision of the persons involved.

Mirror

Read on:

Global exchange of tax information

Repeated financial monitoring. Why do banks conduct it

Fiscals aimed at foreign accounts and business of Ukrainians

Real estate tax: what will be changed, how will we pay

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