Tax when your money and your life are in two countries

This is the guide most likely to end with “ask an accountant”, and that is not a cop-out — it is the honest answer. Tax is the one area on this site where the general rule tells you almost nothing about your own case, because the variables are your country, your year, and your paperwork.

What we can usefully do is explain the shape of the problem, so you know what you are asking about and can tell whether the person answering understands the question.

Nothing here is tax or financial advice. Ukraine’s tax service and a qualified adviser in the country where you live are the authorities on your situation.

Residency is the question underneath every other question

People usually arrive asking “do I pay tax on my Ukrainian pension?” or “on the rent from the flat?” Neither can be answered until you know where you are tax resident, because residency decides which country gets to tax what.

The ladder that decides it is short enough to walk through yourself: am I a Ukrainian tax resident? takes the rungs in the order the Tax Code sets them and says what the answer changes.

Tax residency is not the same as citizenship, and not the same as immigration status. On the Ukrainian side the test is written down, in Tax Code art. 14.1.213, and it is a ladder — each rung is used only if the one above does not settle it:

1. You are resident if your place of residence is in Ukraine.
2. If you also have a place of residence abroad: resident if your permanent home is in Ukraine.
3. If you have a permanent home in both: resident if your centre of vital interests — closer personal or economic ties — is in Ukraine. The Code says where your family permanently lives, or where you are registered as a business, is a sufficient (not exclusive) sign.
4. If that cannot be determined: resident if you were in Ukraine 183 days or more in the tax year, counting days of arrival and departure.
5. If still undetermined: a citizen of Ukraine is deemed resident.

Two things follow. A Ukrainian who has settled abroad with family, home and work there will usually be a non-resident of Ukraine under rungs 2–3 — and that status changes the rate on inherited property (18% instead of 0%) and on rent and sales. And someone who left recently and kept a Ukrainian employer, flat and registered address can still be resident under rung 1 — while also being resident where they now live. That is the “two countries at once” case, and it is common.

What double-taxation conventions actually do

Ukraine has bilateral conventions on the avoidance of double taxation with a large number of countries. It is worth being clear about what they do, because the name oversells it slightly.

A convention does not mean you pay tax in only one place and forget it. It is a set of tie-breaker rules: which country may tax which kind of income, at what maximum rate, and how the other country then relieves the tax already paid — usually by crediting it.

So the practical consequence is generally not “no tax”. It is “not taxed twice on the same income, provided you claim it correctly”. Claiming it correctly usually means paperwork proving where you are resident, which is why Ukraine issues a confirmation of tax-resident status at all — a certificate from your territorial tax office under a procedure dating from 2002, which a foreign tax authority may ask to see apostilled (the tax service apostilles its own certificates, per the MFA’s division of apostille competence). Ukraine has conventions with some seventy countries; the State Tax Service publishes the list in force each January.

Whether a convention exists with your country, and what it says about pensions specifically, is something to check for your own pair of countries rather than assume — pension articles vary more between treaties than most other categories.

The three situations that actually come up

A Ukrainian pension paid to someone living abroad. Which country taxes it is exactly what the relevant convention’s pension article decides, and treaties differ. See receiving a Ukrainian pension while living abroad for the mechanics of the payment itself.

Rent from a Ukrainian flat. Income arising from immovable property is generally taxable where the property is — so Ukraine — but that rarely ends the matter, because your country of residence may tax your worldwide income and then give credit. Both sides usually need declaring. See the flat in Ukraine.

Selling Ukrainian property. A one-off event with its own rules, and the one where people most often discover the tax position after agreeing a price rather than before. The Ukrainian rules — first sale in a year of property held over three years untaxed, 5% or 18% otherwise, 18% for non-residents, plus the 5% military levy — are set out in the flat in Ukraine.

Inheriting in Ukraine. Not an income most people think of as taxable, but Ukraine does: 0% between close family, 5% otherwise — and 18% where the heir is a non-resident, payable before the notary issues the certificate. Details in inheritance from abroad.

The mistake worth avoiding

Assuming that because tax was deducted in Ukraine, nothing needs saying where you live.

In most systems the obligation to declare is separate from the obligation to pay, and it does not disappear because a convention means the final bill is nil. Non-declaration is the thing that causes trouble years later, usually at the worst moment — a mortgage application, a citizenship application, a bank review.

What to bring to an adviser

You will get a better answer, faster and cheaper, with:

• Which country you have actually lived in, and for how many days, in each year concerned
• What Ukrainian income exists, of what type, and what was withheld
• Whether you still have a Ukrainian tax number, employer, or registered residence
• Any confirmation of tax resident status you hold, from either country

Where to check

Ukraine’s State Tax Service is the authority on the Ukrainian side, and the tax authority where you live on theirs. Ukraine’s free legal aid service can point you in the right direction where the question is not really a tax one — see where to look. If something here has gone out of date, tell us.