You still have to pay the taxes as ‘responsible to the budget’ remains the capital issue purchaser, but not the Asset management company which also reports on such an operation to the Tax administration (it would be better if we kept silence or paid and reported ourselves, as it is in the case of salary).
And according to the laws in force, you have to calculate the tax amount yourself and note it in your tax declaration. Those who don’t know how to do this have already missed their chance as the free declaration arrangement service the State tax administration (STA) gives only by the 1st of February. However, you can get familiar with the procedure yourself – in order to do this red the law ‘About taxing income of private persons’ (1). The declaration itself must be given by the 1st of April.
Taxable income is calculated as the odds between income from selling the investment assets and expenses on their purchase. According to the laws in force, the tax rate is 5% of investment profit amount which is paid by the Asset management company (AMC) of the Joint investment institute (JII). Small savers are luckier as the profit amount of up to 1.4 of living wage is not taxable.
To the ‘special surprise’, there appeared to be ‘holes’ in the laws. To be precise, there is no strict definition to ‘investment profit’, so the Tax administration follows special Letter of the STA (2) according to which the 5% tax is imposed only upon dividends from capital issues. Thus, it turns out that the proceeds from sales are imposed the ‘standard’ 15%.
At the same time, in favor of paying only 5% of the income point the following facts:
- The Letter of the STA is not a statutory act.
- The Letter contains the possibility of getting income by private persons as a result of dividends from certificates, which according to the definition and work principles of unit investment funds is impossible.
- There is no strict definition to the notion ‘investment profit’ in the law ‘About taxing income of private persons’.
Thus, in case of serious investments into JII you can calculate the tax according to lower rate, but you might need the attorney services (however, in some AMCs they assure they will not inform the STA of the large operation). If you are a small saver, I recommend paying 15% and sleep soundly, which I personally prefer. In addition, by AMC initiative there has been prepared a project of changes to the law where 5% rate will be also imposed upon proceeds from investment certificates sale.
More detailed information you can see here:
- (1) – the Law of Ukraine ‘About income tax of private persons’, Vidomosti Verkhovnoi Rady (VVR), 2003, #37, p. 308.
- (2) – the Letter of the STA of Ukraine of 20th of July, 2005, # 6838/6/17-3116 ‘About income taxes paid by the joint investment institutes’.
