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Ukraine Clarifies Withholding on Contractual Penalties Under Tax Treaty with the U.S.

|Treaty Development|Ukraine-United States
Ukraine-United States

The Ukraine State Fiscal Service recently issued a guidance letter concerning the tax treatment of fines and penalties paid by a Ukraine resident to a U.S. resident company for failing to fulfill or improper performance of a contractual obligation (contractual penalties). The letter provides that under the Ukraine Tax Code, such contractual penalties are treated as Ukraine source income of a non-resident as other income in connection with business activities in Ukraine and subject to withhold…

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