Ministry offers clarification on «migrant workers» tax

The Ministry of Revenue and Duties of Ukraine notes that Ukrainian law has had the provision on recognition of taxable foreign income, including money transfers from overseas, for over 10 years.

The relevant norm was initially provided for by the Law of Ukraine «On Taxation of personal income tax» of 22 May 2003, and then was included into the Tax Code, which came into force on 1 January 2011. In particular, the current legislation provides that upon receipt of such income a citizen has to file an annual declaration indicating the amount and accordingly pay personal income tax on it. According to the Tax Code, the funds transferred from outside of Ukraine to current or card accounts of citizens are considered foreign income.

The tax rate depends on the amount received. If it exceeds tenfold the minimum monthly wage (in January-November 2013 - 1 147 USD), the applicable rate is 17%, in other cases - 15%. In this case, the Tax Code provides that in the case of international treaties ratified by the Verkhovna Rada of Ukraine, the taxpayer may reduce the amount of annual tax liability for the amount of taxes paid abroad.

In other words, citizens of Ukraine, who in 2012 received any taxable income from foreign sources, including transfers from abroad, were to include the proceeds into the total annual taxable income and before 1 May 2013 to file an annual tax return. Following this year's declaration campaign, citizens increased declared amount of foreign income received in 2012, eight times – up to 9 billion UAH. (1 billion declared in 2011). Payment of tax on such incomes increased by almost five times, and made 580 million UAH.

In view of a lively public debate on taxation of overseas money transfers, the Ministry of revenues and duties of Ukraine emphasizes that it is not a matter of introducing a new tax, but rather direct execution of a legal provision in force since 2003.