Dividend Payment to Non-Resident through Assignment of Claims: Is There a Repatriation Tax?
Taxation of international financial transactions often raises questions for businesses. Especially when it comes to dividend payments through the mechanism of assignment of claims. Let’s break down whether repatriation tax arises in such a situation and what opportunities exist for tax optimization.
Situation
One non-resident (Investor A) had the right to receive dividends from a Ukrainian company. However, they transferred (assigned) this right to another non-resident (Investor B). The question arises: when and if repatriation tax should be withheld?
Tax Authority’s Position
🔹 At the moment of assignment, repatriation tax does not arise
The transfer of a claim between non-residents is not considered as income payment, so no tax is due at this stage.
🔹 Upon the actual payment of dividends to the new creditor, the tax applies
When the Ukrainian company pays dividends to the new non-resident (Investor B), repatriation tax is withheld at the standard rate of 15% (unless the international double taxation treaty provides a lower rate).
Practical Application and Optimization Opportunities
💡 Using the assignment mechanism can be useful for managing international payments.
👉 If the new creditor is a resident of a country with which Ukraine has a tax treaty, the rate may be lower than 15%.
👉 If the new creditor is a resident of Ukraine, no repatriation tax applies. This can be an effective option for optimizing payments.
👉 It is also worth checking whether a structure for exempting dividends from taxation in Ukraine can be used (e.g., in the case of payments between holding companies that meet certain conditions).
Conclusion
✅ The transfer of claims between non-residents is not subject to tax.
✅ Repatriation tax only applies when dividends are paid to the new creditor.
✅ Tax burden can be reduced if the new creditor has a preferential rate under an international treaty or is a resident of Ukraine.
🔹 Have questions about international tax structuring? We can help find the optimal solution for your business! 🚀
