August 12, 2020 · 3 min read
Many companies, especially international ones, may engage not only citizens but also specialists from various countries around the world who are non-residents of Ukraine. In most cases, domestic companies take on the responsibility of resolving housing issues.
What should be known regarding the tax implications for such enterprises?
An enterprise can provide an employee with housing, either that which is directly on the company's balance sheet, or rent it. The most popular option, based on practice, is renting. Regarding this matter, tax authorities on August 20, 2018, provided individual tax consultation No. 3592/6/99-99-15-01-15/IPK, which states that the income of a non-resident individual, represented by the cost of accommodation services in Ukraine paid by a resident enterprise at its own expense, must be included in the total monthly (annual) taxable income of the non-resident employee as an additional benefit.This issue is regulated by the Tax Code of Ukraine. According to sub-paragraph 163.2 of Article 163, the total monthly (annual) taxable income from a source of its origin in Ukraine is subject to taxation for a non-resident. At the same time, income received by such a taxpayer as an additional benefit (except for cases provided for in Article 165 of the Code) in the form of the value of goods (works, services) received free of charge, determined according to ordinary price rules (sub-paragraph «e» of sub-paragraph 164.2.17 of paragraph 164.2 of Article 164 of the Code), also refers to the total monthly (annual) taxable income of the taxpayer. As a result, funds paid for a non-resident's housing must be subject to personal income tax (PIT) and military levy (ML).
It should be remembered that a non-resident individual must obtain a taxpayer registration number; if the number is not specified, the enterprise will be fined an amount from 510 to 1020 UAH. Also, as required by the Tax Code, the enterprise must conclude an agreement with the non-resident regarding the payment of the corresponding income amount, as well as the amount of taxes withheld from such income. Regarding Form No. 1DF, it is also necessary to reflect the amount paid for accommodation and taxes thereon under income sign «126».
There is another way to provide housing for a non-resident employee, namely, providing a company-owned apartment for use. In such a situation, there are options where no income arises in the form of an additional benefit, but two main conditions must be strictly observed: firstly, the housing provided to the employee must belong to the enterprise by right of ownership; the second condition is the mandatory inclusion in the employment contract or collective agreement of the necessity to provide housing to the employee to ensure the performance of their labor functions. However, if the employment contract stipulates the necessity of providing housing for the employee, but the apartment does not belong to the enterprise, i.e., it is not accounted for on its balance sheet, then tax payment is mandatory; and conversely, if the apartment is on the balance sheet, but nothing is stated in the employment contract about providing housing to the employee, then such income is considered an additional benefit for the employee, and taxes must also be paid.
Therefore, the following conclusions can be drawn: providing non-resident employees with housing (rent, compensation for incurred expenses, etc.) should be considered as additional benefits for such employees, and corresponding taxes must be paid; the only exception is when such housing directly belongs to the enterprise and the provision of housing is stipulated by the performance of labor duties according to the employment contract.
