Venture & Dividends: Where Up to 35% of Income Disappears
Series: Ivan’s Investment Company
Ivan started investing in startups as an individual. Things were going well — one startup grew and paid dividends. But when the funds arrived, Ivan was shocked: from $10,000, only $6,500 reached his account. The rest was taken by taxes.
Let’s break down where up to 35% of your income can “disappear” — and how to avoid it.
1. Taxation by the Startup’s Country
🔸 When you invest in a foreign startup as an individual, the startup’s country may withhold taxes on dividends. For example:
- USA — up to 30% (without a tax treaty),
- Canada — 25%,
- Germany — 26.375%.
✅ With a company, you can use international tax treaties to reduce the rate to 5–10%, or even avoid it completely (e.g., intercompany dividends in the EU).
2. Income Tax in Ukraine
If you’re a Ukrainian tax resident and receive foreign dividends as an individual:
- 9% income tax + 1.5% military levy = 10.5%,
- if there’s no tax treaty — you may pay another 5%.
💡 Combined with taxes withheld by the startup, you could lose up to 35% of your total income.
3. Tax on Repatriation
Even if you create a CFC (Controlled Foreign Company) and later transfer profits to yourself — Ukraine will still tax it.
✅ Ways to avoid this:
- Retain and reinvest profit within the company;
- Use jurisdictions with no or low dividend taxes;
- Pay yourself through other methods (e.g., royalties, foreign salary, debt instruments).
4. What Did Ivan Do?
🔹 Created an investment company in Cyprus.
🔹 Invests in venture funds through that company.
🔹 Receives dividends tax-free in Cyprus.
🔹 Keeps profits in the company for reinvestment.
🔹 Withdraws money flexibly — when and where it’s most efficient.
✅ Conclusion
If you invest in venture capital or receive foreign dividends — structure matters.
As an individual, you may lose up to 35% of your income.
With a properly structured company — those losses can be minimized or avoided entirely.
