Loss of tax residency in Ukraine: analysis of the court decision
On October 16, 2024, the court ruled in case No. 280/3288/24, which caused a wide resonance among experts in the field of tax law. In this case, the court considered the issue of loss of tax residency in Ukraine by an individual residing and doing business in Germany. Let’s consider the key aspects of this decision, the positions of the parties and our recommendations.
Facts of the case
Plaintiff, an individual:
Has been living in Germany since June 2023.
Started creating a business in Germany and plans to register his own company.
Has a certificate confirming his tax residency in Germany.
Information from customs authorities indicates that he left Ukraine on June 21, 2023.
At the same time, the plaintiff remained with real estate in Ukraine, which was taken into account by the court as an argument in favor of maintaining his residency in Ukraine.
Court’s position
The court concluded that:
- The presence of real estate in Ukraine is a basis for maintaining tax residency. The court refers to the data of the registers, which indicate that an individual has property in the territory of Ukraine.
- Temporary protection status in Germany is not a basis for losing the status of a resident of Ukraine. Ukrainian legislation stipulates that even under conditions of temporary residence abroad, the resident status remains in Ukraine, if the conditions of the Tax Code are met.
- The court did not take into account the plaintiff’s arguments regarding the center of vital interests in Germany, including his business and family ties.
Why does this decision raise questions?
- Real estate as a criterion for permanent residence
According to international standards, the presence of real estate is not a determining factor for establishing the place of tax residency. The actual place of residence and the center of vital interests are more important. Real estate in Ukraine can be considered an investment asset, not a place of residence.
- Center of vital interests
The plaintiff presented evidence that his economic interests and family are located in Germany, but the court did not take these facts into account. This contradicts the principles of determining tax residency, in particular the Convention on the Avoidance of Double Taxation between Ukraine and Germany.
- Temporary protection
Temporary protection status is not a factor that automatically leaves a person a resident of Ukraine. On the contrary, it confirms the legal stay of a person in another country.
Our recommendations
This decision demonstrates the importance of careful preparation for challenging tax advice related to residency status. Here are some tips for those in a similar situation:
- Collect the maximum possible evidence base.
Confirmation of residence abroad (rental agreement, utility bills).
Documents confirming business or income outside of Ukraine.
Certificates of tax residency status in the new country.
- Refer to international standards.
Use the provisions of the Double Taxation Conventions.
Apply OECD practice on determining residency.
- Seek professional advice.
Consulting with lawyers and tax advisors will help you build a well-reasoned legal position.
Conclusion
This court decision emphasizes the importance of a detailed analysis of each case related to the loss of tax residency. If you are in the process of changing your tax status, prepare for possible challenges and secure professional legal support. Remember that each case is unique and requires an individual approach.
