Ukrainian Nationals and Tax in the UK

There are many Ukrainian nationals now living in the UK who may not be aware of the UK tax requirements for their Ukrainian-sourced income, such as income from working for employers based in Ukraine.

When an individual moves to the UK and becomes a tax resident in the UK (subject to the UK Statutory Residence Tests), they become subject to UK tax on their worldwide income.  There are some situations where this may not apply.  For example,  where someone is non-UK domiciled and does not remit their income to the UK.  However, this is only in limited circumstances.

As a general rule, due to Double Taxation Agreements (DTA) between countries, foreign tax credits can be claimed for any tax paid on foreign income, ensuring there is no double taxation of income.  This is limited to the lower of the foreign tax paid and the UK tax liability on these sources of income.

However, where a Ukrainian national receives Ukrainian employment income and their duties are performed in the UK, the rules become more complex.

There are situations in which an individual can be both resident in the UK and Ukraine due to Ukraine’s tax residency rules.  Where this occurs, there is a ‘tie-breaker’ in Article 4 of the UK /Ukraine DTA which determines which country an individual is ‘treaty resident’ in.

Depending on which country an individual is considered treaty resident in, the treatment of employment income (per Article 15) differs: –

1. If an individual is considered to be a UK treaty resident, the employment income should only be taxed in the UK. They should seek a refund of any Ukrainian tax paid from the Ukrainian tax authorities.
2. If the individual is considered to be a treaty resident of Ukraine, the UK has the right to tax the income but this may also be taxed in Ukraine. The UK tax paid can be claimed as a tax credit against the Ukrainian tax paid, but not the other way around.

Any Ukrainian sourced income should be reported on a UK Self-Assessment tax return for each tax year to 5 April and any tax paid to HM Revenue & Customs by the relevant deadline (usually 31 January after the tax year end).

From a cash flow perspective, this may cause many Ukrainians problems.  If you believe that the above applies to you or have any queries, please get in touch.

Photo by Yehor Milohrodskyi on Unsplash