Dividend payments to non-residents in 2026: the supreme court’s new position

UAH 42.99 million in taxes and penalties was the cost of improperly applying a tax benefit when paying dividends to a non-resident in a particular case.

The Supreme Court supported the position of the State Tax Service in a dispute over the taxation of dividends paid by a Ukrainian company to a company resident in the Netherlands.

The Ukrainian company applied a zero tax rate, relying on the Convention between Ukraine and the Netherlands for the Avoidance of Double Taxation.

However, the Supreme Court drew attention to a key detail.

The Dutch company had acquired existing corporate rights from the previous owner.

The Court concluded that such a purchase does not constitute an investment made directly into the capital of the Ukrainian company that subsequently pays the dividends.

This is of fundamental importance for applying the zero tax rate under the relevant Convention.

As a result, the State Tax Service assessed:

• UAH 34.39 million in non-resident income tax;
• UAH 8.60 million in penalties;
• UAH 42.99 million in total.

The Supreme Court agreed with the tax authority’s position and overturned the lower courts’ decisions that had been issued in favour of the taxpayer.

⚖️ Lawyer’s opinion

This case matters not only to companies working with the Netherlands.

It highlights a risk that should be considered in M&A transactions, the establishment of international holding structures, and dividend payments to foreign owners.

The mere fact of holding corporate rights may not be sufficient to qualify for a reduced or zero tax rate.

Before paying dividends to a non-resident, a company should separately assess:

• the provisions of the relevant double taxation treaty;
• the ownership structure of the Ukrainian company;
• the method by which the corporate rights were acquired;
• conditions regarding the ownership interest and the amount of investment;
• the recipient’s tax residency;
• the non-resident’s entitlement to benefits under the applicable international treaty;
• the documents the company can use to substantiate its position during a State Tax Service audit.

The UAH 42.99 million assessed in this case clearly illustrates the cost of a tax mistake made at the transaction-structuring stage.

For international businesses, tax implications should be modelled before dividends are paid or an M&A transaction is concluded—not after a tax audit report has been issued.

WINNER Law Firm advises on international business structuring, M&A transactions, taxation of transactions with non-residents, and tax disputes with the State Tax Service.

Would you like to review your dividend-payment structure for non-residents or assess the tax risks of an international structure?

📞 Call: +38 096 574 81 02
📧 Email: info@uk-winner.com

Author: Maksym Bahniuk, Head of Tax and Customs Law Practice at WINNER Law Firm.