A manufacturer of metal-plastic windows and doors turned to the Business Ombudsman Council after a routine tax audit. The tax authority concluded that the company had made payments of income to foreign legal entities without withholding non-resident corporate income tax, also known as repatriation tax. As a result, the company was assessed additional taxes and penalties. The company disagreed with these findings and appealed the decision to the State Tax Service of Ukraine.
After reviewing the audit materials and the complaint, the Council found that the payments in question were made for advertising, cloud and freight forwarding services. The recipients included well-known international companies such as Meta Platforms, TikTok, Google and LinkedIn.
In its written submission to the State Tax Service of Ukraine, the Council supported the company’s position. The Council’s investigator noted that, under Ukrainian tax law, repatriation tax does not apply to payments for goods, works and services, including advertising, cloud and freight forwarding services (except for cases where the company uses its own transport). The Council also pointed out that the State Tax Service of Ukraine had repeatedly issued clarifications reflecting the same position.
The Council also took part in the open hearing of the complaint. Following the hearing, the State Tax Service of Ukraine partially upheld the company’s complaint and cancelled more than half of the additional tax assessments, allowing the company to save UAH 400,000.
