The taxation is considered to be an utterly important issue, as it influences the final amount of income the Investor gains. One should understand that until the investors’ assets are allocated in the Fund they are not subject to taxation. Tax is levied on the investors’ income from:
- sale of the Fund’s securities to the third party (not Fund);
- sale of the Fund’s securities to the same Fund (i.e. buyout of securities by the Fund at its market exit, on the motion of the investor upon the relevant decision taken by the Supervisory Board of the Fund, on any day for open-end funds and on the date, mentioned in the issue prospectus for interval funds);
- distribution of dividends by corporate investment fund in case such decision has been taken during the General Meeting of Shareholders of the Fund.
In case of sale of securities of the Fund the difference between their purchase and sale price is subject to taxation. In case of dividend income, the amount of dividends received by the investor is subject to taxation.
Tax rate and taxation treatment vary depending on the nature of an investor (either individual or legal entity) and the source of income, as stated above. If the investor is a legal entity, the return on investment is subject to the rate of 19% from 01.01.2013 to 31.12.2013.
The taxation treatment of the legal entities’ income from securities transactions is regulated by the Law “On Corporate Income Taxation”.
The taxation treatment of income of investors as individuals is regulated by the Law “On Income Tax” and “On Corporate Income Taxation” (as related to the procedure of defining a tax base).
Investment income earned by an individual investor taxes at 5% (Law of Ukraine "On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine concerning improvement of certain norms of the Tax Code of Ukraine").
Profit taxation of non-residents
Profit taxation of non-residents is regulated in accordance with the following regulations of the Tax Code of Ukraine:
- 170.10.1. Profits generated in Ukraine, computed (paid out) for non-residents are taxed in accordance with the rules and rates fixed for non-residents (along with particularities, envisaged by the norms of the Chapter for non-residents)
- 3.2. In the event the international agreement, required by the Verkhovna Rada of Ukraine, reads other rules than envisaged by the Code, the rules of the international agreement are applied.
(The Tax Code, the Verkhovna Rada of Ukraine, dated 02.12.2010, № 2755-VI "The Tax Code of Ukraine")
Profit of non-residents generated in Ukraine is taxed at the same rates as it is for residents. However, in all cases it is necessary to take into consideration the regulations of the Conventions on evading double taxation, i.e. to determine what type of profit is referred to and what tax rate is set in compliance with the Convention.