Ukraine - Estonia tax treaty

You live in Ukraine and own an Estonian OÜ, or plan to found one, or you live in Estonia under temporary protection and still have ties to Ukraine. This page shows how the Estonia - Ukraine tax treaty splits the right to tax between the two countries, and what Ukrainian and Estonian law add. The Ukrainian law parts cite the Tax Code of Ukraine and the NBU rules on zakon.rada.gov.ua. Ukrainian law changes often, especially under martial law, so confirm each Ukrainian point with a Ukrainian tax adviser before you act.

Treaty facts

In short

• e-Residency and an Estonian OÜ do not make you resident in Estonia. If you live in Ukraine, Ukraine taxes your worldwide income.
• If you run the OÜ from Ukraine, the treaty still keeps the OÜ resident in Estonia, but your work there can create a Ukrainian permanent establishment taxed at 18 percent.
• Estonia withholds no tax from your dividend. Ukraine taxes it at 9 percent plus the 5 percent military levy, and on the texts you cannot credit the Estonian 22/78 company tax.
• The Ukrainian CFC (KIK) rules usually tax the profit the OÜ keeps, unless the EUR 2 million or the passive income exemption applies. The report is due even when the profit is exempt.
• The Estonian and Ukrainian texts differ on board fees and on pensions. The English text decides, and it is not available, so get advice before you rely on either.
• Under temporary protection in Estonia, both states may claim you. The treaty tie-breaker decides, and a registered FOP points to Ukraine under Ukrainian law.

Does e-Residency or an Estonian company make me tax resident in Estonia?

No. You are resident in Estonia only if you have your place of residence there or stay there 183 days in 12 months (TuMS § 6 lg 1). e-Residency and company ownership count for neither. An e-resident who lives in Ukraine pays Estonian tax only on Estonian-source income (TuMS § 6 lg 3, § 29). The Estonian side is explained in our guide on founder residency, permanent establishment and CFC rules.

Ukraine treats a person with a place of residence in Ukraine as resident. Its own ladder then looks at the permanent home, the centre of vital interests, 183 days in Ukraine in the tax year, and finally citizenship (Tax Code of Ukraine art. 14.1.213). Under that article, family members living in Ukraine or registration as an entrepreneur (FOP) is enough to place the centre of vital interests in Ukraine, and registration as a self-employed person is on its own enough for residence. The same article says that Ukraine's own "e-resident" status is not a residence factor. That status has nothing to do with Estonian e-Residency.

If both countries treat you as resident, the treaty decides in this order: permanent home, centre of vital interests, habitual abode, nationality, and finally agreement between the two tax authorities (Art. 4(2) of the treaty). The MLI does not change Art. 4. A resident who leaves Ukraine for permanent residence abroad must file a tax return at least 60 calendar days before departure (Tax Code art. 179.3). In Estonia, you report an arrival or departure on form R (TuMS § 6 lg 6).

Dual citizens take note: a Ukrainian citizen who also holds another citizenship has no right to a Ukrainian credit for tax paid abroad, under the Tax Code or under a treaty (Tax Code art. 14.1.213). This affects every credit on this page.

Confirm with a local adviser: Ukraine has no split-year rule in the provisions we read, so ask whether you stay resident for the whole calendar year of departure.

I live in Estonia under temporary protection: am I still a Ukrainian tax resident?

Possibly, and Estonia may treat you as resident too. Estonia treats you as resident from the day of arrival if you have your place of residence in Estonia or stay 183 days in 12 months (TuMS § 6 lg 1; EMTA). Ukraine still treats you as resident if family members live in Ukraine, or if you keep a FOP or other self-employed registration (Tax Code art. 14.1.213).

When both states claim you, the treaty tie-breaker decides: permanent home, then centre of vital interests, then habitual abode, then nationality (Art. 4(2) of the treaty). The Ukrainian "sufficient condition" does not bind the treaty test, which weighs all your personal and economic ties. A person with a home in Estonia, children at school in Estonia and an OÜ run from Estonia may be resident in Estonia under the treaty even with a FOP in Ukraine. A person whose family stayed in Ukraine is likely resident in Ukraine. The Ombudsman of Ukraine says that under temporary protection the centre of vital interests becomes decisive, with family residence and FOP registration weighed (Ombudsman of Ukraine).

What follows for your OÜ:

• If you are resident in Estonia under the treaty, the OÜ pays the Estonian distribution tax on dividends (TuMS § 50 lg 1), and the Ukrainian CFC rules, which apply only to a controlling person resident in Ukraine, no longer apply (Tax Code art. 39-2.1.2). Your FOP income may be taxed in Ukraine only through a fixed base or permanent establishment there, or if you spend more than 183 days in Ukraine in a twelve-month period (Art. 7(1) and 14(1) of the treaty).
• If you are resident in Ukraine under the treaty, read the sections below on dividends and the CFC rules.

If both states keep claiming you, use the mutual agreement procedure.

Confirm with a local adviser: whether closing or suspending the FOP changes the Ukrainian analysis, and whether Ukraine can refuse a residence certificate to a person who also has Estonian residence. Ask EMTA whether it treats the protection status as relevant to residence.

Can Ukraine treat my Estonian company as a Ukrainian company?

Under its own law, yes, but the treaty keeps the OÜ in Estonia. Since 2020, a foreign company whose place of effective management is in Ukraine is a Ukrainian resident corporate taxpayer (Tax Code art. 133.1.5). Estonia treats the OÜ as resident because it was founded under Estonian law (TuMS § 6 lg 2).

The treaty gives a company that both states claim to the state under whose law it gets its legal status (Art. 4(3) of the treaty). For an OÜ that is Estonia. The MLI does not change this rule. The Tax Code itself says that a company treated as non-resident under a tax treaty is automatically a non-resident taxpayer in Ukraine (Tax Code art. 133.1.5). Without the treaty, Ukraine would tax a resident company at the basic rate of 18 percent (Tax Code art. 136.1).

The real risk is a permanent establishment in Ukraine. The treaty lists "a place of management" as the first example of one (Art. 5(2)(a) of the treaty; see below). The e-Residency programme warns that a company "effectively managed from Ukraine" is "recognised as a corporate income tax payer in Ukraine" (e-Residency). EMTA adds that such a company "will probably have a permanent establishment abroad" (EMTA).

Confirm with a local adviser: how the State Tax Service applies the "automatically non-resident" rule in practice, and whether it asks for an Estonian residence certificate of the OÜ. Both available texts of Art. 4(3) point to the law of incorporation, but the prevailing English text was not available.

What does Ukraine look at to decide where my company is managed?

The Tax Code lists the facts: where the executive body meets most regularly, from where officers take management decisions and run daily operations, and from where the company is actually managed, whatever the formal powers. As a fallback, it looks at where the bank accounts, the accounting and the staff are managed (Tax Code art. 133.1.5). The Ukrainian definition of a permanent establishment also puts the place of management first (Tax Code art. 14.1.193). So the same facts decide whether the OÜ has a Ukrainian permanent establishment.

To keep management in Estonia, the facts must change, not only the paperwork:

• a board member resident in Estonia who really takes the decisions;
• board resolutions taken and signed in Estonia;
• an Estonian office, accountant and bank relationship;
• contracts negotiated and signed from Estonia.

An Estonian service address or contact person alone does not help. Neither do "meetings" on paper while you decide everything from home. If you keep the bank tokens and the books at home in Ukraine, you meet the Ukrainian fallback criteria even if a nominee signs in Estonia. For many owners it is more realistic to accept a Ukrainian permanent establishment than to build Estonian substance that fails in an audit. The Estonian evidence list is in our guide on founder residency, permanent establishment and CFC rules.

Confirm with a local adviser: how the State Tax Service reads "regular meetings" and "actual management" for a company with one owner.

Does my work from home in Ukraine create a permanent establishment?

Often yes. A fixed place of business through which the OÜ carries on its business is a permanent establishment, and the treaty lists a place of management and an office (Art. 5(1) and 5(2)(a) and (c) of the treaty). A person who is authorised to conclude contracts in the OÜ's name and habitually does so in Ukraine also creates one (Art. 5(5)). The MLI does not widen this rule, because Estonia reserved MLI Arts 12 to 15. Work that is only preparatory or auxiliary does not count (Art. 5(4)), but development, sales and management are core work.

Ukrainian law goes further: services through employees in Ukraine for more than 183 days in 12 months, and persons who habitually negotiate the essential terms of contracts, create a permanent establishment (Tax Code art. 14.1.193). For an Estonian resident company, the treaty definition prevails.

Ukraine can then tax the profit that belongs to the permanent establishment, priced at arm's length (Art. 7(1) and (2) of the treaty), at 18 percent in the general procedure (Tax Code art. 141.4.7, 136.1). A non-resident that operates through a permanent establishment must register with the Ukrainian tax authority, and an unregistered one found in an audit can be registered without an application (Tax Code art. 64.5).

On the Estonian side, a dividend paid out of permanent establishment profit that was taxed in Ukraine bears no Estonian distribution tax (TuMS § 50 lg 1^1 p 4). EMTA confirms it, and adds that the permanent establishment profit must still be reported in Annex 7 of form TSD and the dividend recipients on form INF 1 (EMTA). For other income taxed in Ukraine, the OÜ can deduct the Ukrainian tax from its distribution tax (TuMS § 54 lg 5). Keep the Ukrainian tax assessment and proof of payment.

Confirm with a local adviser: how a permanent establishment of a one-person foreign company registers in Ukraine, and how its profit is computed.

How is my board member fee taxed?

Estonia taxes it under its own law. The OÜ withholds 22 percent income tax (TuMS § 29 lg 2, § 41 p 2, § 4 lg 1) and pays 33 percent social tax (SMS § 2 lg 1 p 4, § 7 lg 1). EMTA says the company pays both "regardless of the location where work is carried on" (EMTA).

Whether the treaty allows this depends on Art. 16, and the two available texts differ. The Estonian text covers fees paid to a member of the management board, the one board every OÜ must have. The Ukrainian text speaks of a member of the board of directors, which can be read as a supervisory board. If Art. 16 does not apply, the fee falls under Art. 15(1), or under Art. 14 or Art. 21(1) if board work is not an employment, and on each of them Estonia has no right to tax board work done in Ukraine by a Ukrainian resident who has no fixed base in Estonia. The prevailing English text decides, and it was not available.

Ukraine taxes the fee as foreign income in your annual return at 18 percent (Tax Code art. 170.11.1, 167.1), plus the 5 percent military levy. The levy falls to 1.5 percent from 1 January of the year after the third calendar year after martial law ends (Tax Code, section XX, subsection 10, para. 16-1). Ukraine credits the Estonian income tax, but not the social tax, up to the Ukrainian tax on that income (Art. 23 of the treaty; Tax Code art. 170.11.2, 170.11.4). You need a certificate of the Estonian tax authority on the income and the tax paid (Tax Code art. 13.5). The return is due by 1 May and the tax by 1 August of the following year (Tax Code art. 49.18.4, 179.7).

Confirm with a local adviser: whether EMTA and the State Tax Service treat an OÜ management board member as covered by Art. 16, and whether the Ukrainian credit also reduces the military levy. Ask EMTA for the tax certificate in good time. More on the Estonian side: founder remuneration.

Where is a salary for work I do in Ukraine taxed?

Only in Ukraine. A salary of a Ukrainian resident for work done in Ukraine is taxable only there (Art. 15(1) of the treaty). Estonia taxes a non-resident's salary only for work done in Estonia (TuMS § 29 lg 1), and charges no social tax on pay for work abroad (SMS § 3 p 7). EMTA: "If the work of a non-resident is carried on outside of Estonia, there is no need to declare employment income or pay taxes on employment income in Estonia" (EMTA).

Ukraine taxes the salary at 18 percent plus the 5 percent military levy (Tax Code art. 170.11.1, 167.1, section XX, subsection 10, para. 16-1). An OÜ without a Ukrainian permanent establishment is not a Ukrainian tax agent, so you file the annual return by 1 May and pay by 1 August (Tax Code art. 49.18.4, 179.7).

Days worked in Estonia are different. Pay for them may be taxed in Estonia from the first day, because the employer is an Estonian resident (Art. 15(1) and 15(2)(b) of the treaty; TuMS § 29 lg 1). Ukraine then credits the Estonian tax. Keep a record of those days. A board member fee is a separate payment under Art. 16 (see the section above).

Confirm with a local adviser: whether you or the foreign employer must register for the Ukrainian single social contribution (ESV), and how Ukrainian labour law treats a foreign employer.

Which social security applies to me?

The tax treaty does not decide this: it covers only taxes on income and capital (Art. 2 of the treaty). Ukraine is not in the EU, so the EU A1 certificate does not apply. Instead, the Estonia - Ukraine social security agreement of 05.10.2010, in force from 01.02.2012, applies the law of the state where you work, whatever your residence (social security agreement, Art. 5(2)). A person working in both states is covered by the law of the state of residence (Art. 5(4)), and a posted worker keeps the law of the sending state for up to 24 months (Art. 5(5)). The Social Insurance Board lists Ukraine among the states with a bilateral agreement (Sotsiaalkindlustusamet).

For a salary for work in Ukraine, Estonia charges no social tax anyway (SMS § 3 p 7). For a board fee, Estonian law charges 33 percent social tax wherever the work is done (SMS § 2 lg 1 p 4), and EMTA names only an A1 certificate from an EEA state as the way out (EMTA). Payments that an international agreement keeps from tax in Estonia are exempt (SMS § 3 p 15), and board work done in Ukraine points to Ukrainian law under Art. 5(2) of the agreement. Whether EMTA accepts that, and which Ukrainian certificate proves it, is not settled. Until it is, the OÜ should pay the social tax or get a written position from EMTA or the Social Insurance Board. Without social tax paid in Estonia, the fee gives you no Estonian health insurance or pension rights.

Confirm with a local adviser: whether you owe the Ukrainian single social contribution (ESV) on a foreign board fee or salary.

How does Ukraine tax a dividend from my company?

Ukraine taxes a dividend from a foreign company at half the basic rate, so 9 percent, plus the 5 percent military levy (Tax Code art. 167.5.4, 170.11.1, section XX, subsection 10, para. 16-1). You declare it in the annual return by 1 May and pay by 1 August of the following year (Tax Code art. 49.18.4, 179.7). The treaty lets Ukraine tax the dividend without limit (Art. 10(1) of the treaty). A rate of 1.5 percent for the military levy, quoted in older sources, is out of date.

Estonia normally withholds nothing from a dividend paid to you. The OÜ pays the corporate income tax of 22/78 on the distribution (TuMS § 50 lg 1, § 4). EMTA: "If an Estonian company pays income tax on dividends at the normal rate of 22/78, no further income tax withholding will apply for the dividend distribution to a natural (e-resident) person" (EMTA). The OÜ declares the dividend, not you.

One exception: an OÜ withholds 7 percent from a dividend that is exempt under TuMS § 50 lg 1^1 if the profit behind it was taxed at the former 14/86 rate before 2025 (TuMS § 61 lg 68). This can happen in a holding OÜ that passes on older subsidiary dividends. That 7 percent is your own tax, stays below the 15 percent treaty cap (Art. 10(2)(b)), and can be credited in Ukraine against a certificate of the tax withheld.

A dividend paid out of profit already taxed under the CFC rules is treated differently (see the CFC section). See also how the distribution tax works, how to pay a dividend and the dividend tax calculator.

Can I credit the Estonian 22/78 company tax against my Ukrainian tax?

On the texts, no. Ukraine credits Estonian tax computed on the same income (Art. 23 of the treaty). The 22/78 is the company's tax on its profit, and the dividend article says it does not affect the taxation of the company on the profits out of which the dividend is paid (Art. 10(2), last sentence). The only credit for underlying company tax in the treaty is for an Estonian company that receives Ukrainian dividends (Art. 23 of the treaty, Estonian method), not for a Ukrainian individual.

Ukrainian law credits foreign tax only under a treaty, up to the Ukrainian tax on that income, and only against a certificate of the foreign authority on the tax paid (Tax Code art. 13.5, 170.11.2, 170.11.4). A certificate of the OÜ's TSD tax is a certificate of the company's tax. EMTA agrees from the Estonian side: "income tax paid by the Estonian company will not count" (EMTA). So the Ukrainian 9 percent plus the levy comes on top of the Estonian 22/78.

The treaty rates of 5 and 15 percent only cap an Estonian tax on the shareholder. Estonia levies none, apart from the transitional 7 percent above, so the rates give you nothing to credit.

There is one domestic exception: if the OÜ's profit is taxed in Ukraine under the CFC rules, that tax is reduced by the company tax the OÜ actually paid (Tax Code art. 170.13.2.4; see the CFC section below).

Confirm with a local adviser: some Ukrainian advisers claim a credit for the 22/78. Ask for the State Tax Service position or an individual tax consultation before you rely on it.

What if my company lends me money or pays my private costs?

In Estonia, the OÜ pays 22/78 on a loan to a shareholder that is in substance a hidden profit distribution (TuMS § 50^2) and on private expenses it pays for you (TuMS § 51). A benefit given to you as a board member, including a loan at below-market interest, is a fringe benefit taxed with income tax and social tax (TuMS § 48 lg 3, lg 4 p 6). All three are taxes on the company.

In Ukraine, the principal of a loan that is repaid is not income (Tax Code art. 165.1.31). But a forgiven debt, a refund of your private expenses or help that you do not repay is an "additional benefit" taxed at 18 percent plus the military levy (Tax Code art. 164.2.17, 170.11.1, 167.1). If Ukraine treats the payment as a dividend, the rate is 9 percent.

The treaty does not force both states to classify a payment the same way. Income that Estonian law taxes like income from shares is a dividend (Art. 10(3) of the treaty), a benefit for board work falls under Art. 16, and one for employment under Art. 15. So Estonia can tax the company at 22/78 while Ukraine taxes you at 18 percent, with no credit either way. The only treaty route is the mutual agreement procedure. A loan from the OÜ to you also needs a written agreement, a market interest rate and real repayment, and the NBU rules can block the transfer (see below).

How is interest between Ukraine and my company taxed?

Interest paid from Ukraine to the OÜ or to you abroad bears 15 percent Ukrainian withholding (Tax Code art. 141.4.1, 141.4.2). The treaty caps it at 10 percent for the beneficial owner (Art. 11(2) of the treaty). The payer applies the cap only if it holds a residence certificate, legalised and translated as Ukrainian law requires. Otherwise it withholds the full rate and the excess is refunded through the payer's tax office (Tax Code art. 103.2 to 103.5, 103.11). The OÜ pays Estonian tax only when it distributes the profit, and can then deduct the Ukrainian tax (TuMS § 54 lg 5).

Interest paid by the OÜ to a Ukrainian lender bears no Estonian withholding (TuMS § 29 lg 7, § 41 p 4). A Ukrainian individual declares it at 18 percent plus the military levy (Tax Code art. 167.5.1, 170.11.1).

Between related persons, the rate must be at market level. The treaty limits apply only to an arm's-length amount (Art. 11(7) of the treaty), and the Estonian transfer pricing rules test the rate (TuMS § 50 lg 4). In Ukraine, transfer pricing control starts above UAH 150 million of annual revenue and UAH 10 million per counterparty (Tax Code art. 39.2.1.7).

Does Ukraine withhold tax on royalties or service fees paid to my company?

Royalties: yes. Ukraine withholds 15 percent from royalties paid to a non-resident (Tax Code art. 141.4.1, 141.4.2). The treaty caps it at 10 percent for the beneficial owner (Art. 12(2) of the treaty). The treaty definition is wide: it also covers payments for the use of industrial, commercial or scientific equipment (Art. 12(3)). The payer needs the OÜ's residence certificate, legalised and translated, or the OÜ claims a refund of the excess. A certificate for the previous year can be used, with the current one supplied after the year ends (Tax Code art. 103.2, 103.4, 103.5, 103.8, 103.11).

Service fees: no withholding. The Tax Code excludes payment for goods, works or services supplied to a Ukrainian resident (Tax Code art. 141.4.1). Under the treaty, service fees are business profits, which Ukraine may tax only through a Ukrainian permanent establishment (Art. 7(1) of the treaty).

If your OÜ pays royalties to a Ukrainian resident, it withholds 10 percent in Estonia (TuMS § 29 lg 6 p 4, § 41 p 8, § 43 lg 1 p 2), within the treaty cap. Fees for services performed outside Estonia bear no Estonian withholding (TuMS § 29 lg 3).

Confirm with a local adviser: whether Ukraine treats a software licence or SaaS (software as a service) payment as a royalty or a service.

What if my company owns a Ukrainian company?

Ukraine withholds 15 percent on dividends to a non-resident (Tax Code art. 141.4.1, 141.4.2). The treaty reduces it to 5 percent if the OÜ is the beneficial owner and holds at least 25 percent of the capital, and 15 percent in other cases (Art. 10(2) of the treaty). The Estonian text says the holding must be direct; the Ukrainian text does not. Ukraine is not an EU state, so the EU Parent-Subsidiary Directive does not apply. Ukraine refuses the reduced rate to an agent or conduit without real functions, assets or staff, and where getting the treaty benefit was the main purpose (Tax Code art. 103.2, 103.3). Since 01.01.2022, the treaty's own principal purpose test also applies (MLI Art. 7(1)).

In Estonia, the OÜ can pass the dividend on without the 22/78 tax if it held at least 10 percent of the Ukrainian company when it received the dividend, and Ukrainian tax was withheld on the dividend or charged on the underlying profit (TuMS § 50 lg 1^1 p 3). The dividend must not be deductible for the payer (TuMS § 50 lg 1^3). Below 10 percent, the Ukrainian tax is only deducted from the distribution tax (TuMS § 54 lg 5). A Ukrainian subsidiary paying the 18 percent profit tax meets the "taxed" condition (Tax Code art. 136.1). A subsidiary on the single tax or the Diia City regime may not, so check before you rely on the exemption.

Keep the Ukrainian withholding statement and the subsidiary's tax returns. They prove the conditions years later. You are then taxed in Ukraine on the OÜ's dividend at 9 percent plus the levy, and the CFC rules may already reach the profit.

Who taxes the gain when I sell my company shares?

Ukraine alone, while you live there. The treaty leaves gains on shares to the seller's state of residence (Art. 13(5) of the treaty), unless the OÜ's value comes mainly from Estonian real estate (see the next section). Estonia does not tax a non-resident on a gain from shares of an ordinary OÜ (TuMS § 29 lg 4 p 5).

In Ukraine, a sale of corporate rights gives investment profit: the price minus the documented acquisition cost, netted with other investment results of the year, taxed at 18 percent (Tax Code art. 170.2, 170.11.1, 167.5.1), plus the 5 percent military levy. You declare it in the annual return. The Cabinet of Ministers confirms that residents declare foreign income in Ukraine at these rates (Cabinet of Ministers of Ukraine). A sale also ends your control of a CFC, which you must notify within 60 days (Tax Code art. 39-2.5.5).

A buy-back of shares by the OÜ, a capital reduction or a liquidation is different. Estonia taxes the payment above your acquisition cost also for a non-resident, to the extent it was not taxed at company level (TuMS § 29 lg 5, § 15 lg 2 and 3).

Confirm with a local adviser: whether the treaty lets Estonia keep the tax on a buy-back or liquidation (as a dividend or as a gain), and how Ukraine accepts the acquisition cost of shares paid by a contribution in kind.

How are rent and real estate gains taxed?

The state where the property is may tax rent and gains from it (Art. 6(1) and 13(1) of the treaty). The treaty also lets that state tax income from using or letting shares that give the right to use the company's real estate (Art. 6(4)). Since the MLI took effect, a gain on shares or comparable interests that derived more than 50 percent of their value from real estate in the other state at any time in the 365 days before the sale may also be taxed there (MLI Art. 9(4), which replaces Art. 13(2)). This applies for withholding taxes from 01.01.2022, and for other taxes from periods beginning 25.06.2022 in Ukraine and 01.01.2023 in Estonia.

Estonia taxes a non-resident on gains from Estonian real estate, on gains on holdings of at least 10 percent in a company whose assets were more than 50 percent Estonian real estate at the sale or in the two years before, and on rent from registered Estonian property (TuMS § 29 lg 4 p 1 and p 5, lg 6 p 2). Estonia taxes a land-rich share gain only where both the treaty test and the Estonian test are met.

Ukraine taxes its resident on foreign rent and gains at 18 percent plus the levy, and credits the Estonian tax up to the Ukrainian tax, against a certificate of the Estonian tax authority (Tax Code art. 13.4, 13.5, 170.11.1 to 170.11.4, 167.1).

Confirm with a local adviser: whether the Ukrainian rules for real estate sales (one tax-free sale a year after three years, otherwise 5 percent, Tax Code art. 172) apply to Estonian property, and whether the Tax Code's exclusion of "taxes on capital (capital gains)" from the credit (art. 170.11.3) limits the credit for Estonian tax on a gain.

Can the Ukrainian CFC rules tax the profit my company keeps?

Yes, as a rule. You are a controlling person if you hold more than 50 percent of the OÜ, more than 10 percent where Ukrainian residents together hold at least 50 percent, or if you have actual control (Tax Code art. 39-2.1.2). Actual control includes giving binding instructions, negotiating the contracts, operating the bank accounts, or being named as beneficial owner (Tax Code art. 39-2.1.6). Your share of the OÜ's adjusted profit then enters your annual return at 18 percent (Tax Code art. 39-2.3, 170.13.1, 167.1), plus the military levy, unless an exemption applies (see the next section). Estonia does not tax the profit the OÜ keeps, so the effective tax rate test usually fails.

The treaty bars Ukraine from taxing the OÜ itself on its undistributed profits (Art. 10(5) of the treaty). The CFC charge falls on you, not on the OÜ, and no article of the treaty we read deals with it.

When the profit is later paid out:

• distributed before the CFC report for that year: the 9 percent dividend rate applies to the amount received;
• distributed after the report and before the end of the second year after the reporting year: the CFC tax is recomputed at 9 percent, and the dividend is not taxed again;
• distributed later: no recomputation and no second charge (Tax Code art. 170.13.2.1 to 170.13.2.3).

The Ukrainian tax on CFC profit is reduced by the corporate tax the OÜ actually paid, with documents filed with the return, up to the tax on that profit (Tax Code art. 170.13.2.4). That can include the Estonian distribution tax. Keep EMTA's record of the TSD tax and the bank payment. Estonia gives no relief in the other direction: the OÜ cannot deduct your personal Ukrainian CFC tax from its distribution tax (TuMS § 54 lg 5). The Estonian side is in our guide on founder residency, permanent establishment and CFC rules.

Confirm with a local adviser: whether the Estonian 22/78 paid in a year counts in the effective tax rate test, whether the military levy applies to CFC profit and is recomputed too, whether the Ukrainian CFC charge is compatible with the treaty, and whether the treaty credit also covers it.

Is my company exempt from Ukrainian CFC tax under the EUR 2 million or the passive income test?

Either test can exempt it. The EUR 2 million test applies when the total aggregate income of all your CFCs, from all sources per their financial statements, does not exceed the equivalent of EUR 2 million at the end of the reporting period (Tax Code art. 39-2.4.2). The statute measures income, not profit, and adds up all your CFCs. An OÜ with EUR 3 million of turnover and a small profit is not exempt under this test.

The passive income test needs a tax treaty in force, which this treaty is. Then the profit is exempt if passive income is not more than 50 percent of the OÜ's total income, or if passive income is earned with real functions, risks, staff and assets (Tax Code art. 39-2.4.1). Passive income includes interest, investment profit, royalties and dividends (Tax Code art. 14.1.268). An OÜ that sells services or goods to clients usually passes. A holding or IP licensing OÜ usually does not.

An exemption removes the tax, not the duty to report. The CFC report is still filed and states the ground of exemption (Tax Code art. 39-2.5.3). You may also waive an exemption and choose taxation (Tax Code art. 39-2.4.4).

Confirm with a local adviser: how foreign currency income is converted for the EUR 2 million test, and how service income from related parties is classified.

How can I move money between my company and Ukraine under the NBU rules?

The treaty has no rule on currency control. Under martial law, NBU Resolution No. 18 forbids banks to make cross-border transfers out of Ukraine, except in the cases it lists (NBU Resolution No. 18, point 14). An individual may pay abroad for goods, works, services or housing up to UAH 200,000 a month from hryvnia accounts (point 14, subpoint 8). We found no listed case for an individual's capital contribution or loan to a foreign company from Ukraine, so founding or funding an OÜ will likely need money already held abroad.

The restrictions concern outgoing transfers. We found no limit on receiving a salary, board fee or dividend from the OÜ, but the receiving bank checks the source of the funds, and the money is income to declare in Ukraine (Tax Code art. 170.11.1). The 180-day settlement deadline applies to exports and imports of goods (point 14-2), not to services or dividends.

The NBU changes the resolution often. Check the current text on the day of the transfer.

Confirm with a local adviser: which documents your Ukrainian bank wants for a dividend or board fee (board resolution, annual report, EMTA tax record), and whether any rule lets an individual invest in a foreign company from Ukraine.

Is an Estonian company better than a group 3 FOP or a Diia City company?

For a person who lives and works in Ukraine, the OÜ does not take the business out of Ukrainian tax. Work done from Ukraine can create a permanent establishment (Art. 5(1) and 7(1) of the treaty), the OÜ is your CFC, and its dividends are taxed in Ukraine. The e-Residency programme says the same: "E-Residency does not exempt your company from foreign tax liabilities in Ukraine" (e-Residency).

The Ukrainian alternatives:

• A group 3 FOP pays 5 percent of income, or 3 percent if VAT registered, within an annual income limit of 1167 minimum wages (Tax Code art. 291.4, 293.3), plus a 1 percent military levy (section XX, subsection 10, para. 16-1).
• A Diia City resident on the special regime pays 9 percent on a base that is mainly distributed or withdrawn capital, instead of 18 percent on annual profit (Tax Code art. 136.8, 141.9-1). Its dividends to an individual are exempt if it paid no dividends for two calendar years in a row (Tax Code art. 170.5.5).

You can keep a FOP and invoice the OÜ, but the price must be at arm's length, and either state can adjust it (Art. 9(1) of the treaty). Ukraine's CFC computation adjusts transactions with related non-residents too (Tax Code art. 39-2.3.2.4). Such a structure also strengthens the case that the OÜ is run from Ukraine. A registered FOP is also a ground for Ukrainian residence (see above). The Estonian side of paying a contractor is in our guide on contractors and cross-border workers.

Confirm with a local adviser: the single social contribution (ESV) of a FOP and of a director, and the Diia City conditions, which are in a separate law.

Does Ukraine charge exit tax if I move to Estonia?

We found no Ukrainian exit tax on an individual's unrealised gain. But a resident who leaves Ukraine for permanent residence abroad must file a tax return at least 60 calendar days before departure (Tax Code art. 179.3). The CFC report for your last year of Ukrainian residence is filed with the annual return (Tax Code art. 39-2.5.2). The tax authority can assess CFC matters for 2555 days after the filing deadline (Tax Code art. 102.1), so keep the OÜ's financial statements for the Ukrainian years.

Once you are resident only in Estonia under the treaty, a later sale of the shares is taxable only in Estonia (Art. 13(5) of the treaty), unless the OÜ is rich in Ukrainian real estate (MLI Art. 9(4)). Estonia taxes the gain on disposal (TuMS § 15), and treats you as resident from the day of arrival (TuMS § 6 lg 1). Estonia has no exit tax on individuals.

Confirm with a local adviser: that Ukraine has no exit tax for individuals, how it treats the year of departure, and whether a CFC notification is expected when residence ends.

What changes when I move to Ukraine with an existing company?

From the day you become resident in Ukraine (Tax Code art. 14.1.213), Ukraine taxes your worldwide income (Tax Code art. 162.1.1). You become a controlling person of the OÜ if you meet the control tests, and you file the CFC report with each annual return (Tax Code art. 39-2.1.2, 39-2.5.2). The CFC rules apply from the first year, so plan dividends before you arrive if the retained profit is large.

There is no step-up. On a later sale, Ukraine taxes the price minus the documented acquisition cost (Tax Code art. 170.2.2; Art. 13(5) of the treaty), so a gain built up while you lived in Estonia can be taxed in Ukraine. Estonia charges no exit tax when you leave. We found no Ukrainian regime for newcomers. Returns of capital you contributed are not taxable in Ukraine (Tax Code art. 170.13-1), so keep a record of your contributions.

Confirm with a local adviser: whether arriving with existing shares triggers the 60-day CFC notification (Tax Code art. 39-2.5.5), and which acquisition cost Ukraine accepts for shares acquired before arrival.

Which country taxes my pension?

For a pension from past employment, the two available texts give opposite answers. The Estonian text of Art. 18(1) gives it only to the state of residence. The Ukrainian text gives it only to the state from which the payments are transferred. The prevailing English text decides, and it was not available, so settle this point before you rely on either.

Domestic law follows each reading. Ukraine excludes a foreign pension from tax if a treaty exempts it or taxes it in the paying country (Tax Code art. 165.1.1). Estonia taxes pensions paid by Estonia to a non-resident (TuMS § 29 lg 9), unless a treaty gives the right to the residence state (TuMS § 6 lg 5).

A pension for government service, for example a Ukrainian civil service or military pension, is taxable only in the paying state, unless you are a resident and national of the other state (Art. 19(2) of the treaty). Ukraine also taxes its own state pensions above a threshold at 18 percent (Tax Code art. 164.2.19, 167.4).

Confirm with a local adviser: how EMTA and the State Tax Service each apply Art. 18 in practice, and which Estonian pension pillars count as pensions for past employment. If they disagree, use the mutual agreement procedure.

What must I report in Ukraine about my company, and what are the fines?

As a controlling person resident in Ukraine, you:

• notify the tax authority within 60 days of each acquisition of a holding or start of actual control, and of each disposal or end of control (Tax Code art. 39-2.5.5);
• file the CFC report electronically with the annual return by 1 May, with certified copies of the OÜ's financial statements (Tax Code art. 39-2.5.2, 49.18.4). If the statements are not ready, you file a short report and the full one by the end of the following year, without fines (Tax Code art. 39-2.5.3, 39-2.5.4);
• pay the tax by 1 August (Tax Code art. 179.7).

The fines are high (Tax Code art. 120.7): 100 subsistence minimums for not filing the report, one per day up to 50 for late filing, 3 percent of the CFC's income or 25 percent of its adjusted profit (whichever is higher, up to 1000) for omitting a CFC, and 300 for each missed notification.

The martial-law moratorium: for breaches from 01.01.2022 to the end of the month in which martial law ends, these fines are not applied if you fulfil the duties within six months after martial law ends. Administrative and criminal liability for these breaches is excluded too (Tax Code, section XX, subsection 10, para. 72). The duty to report and to pay the tax is not suspended. The moratorium does not cover the fine for not producing documents on request, or the daily fine when the report is still missing 30 days after the deadline for paying a fine.

What Ukraine learns: the treaty lets the two tax authorities exchange information needed for their domestic taxes (Art. 27(1) of the treaty). Ukraine has implemented the CRS, the automatic exchange of financial account data (Tax Code art. 39-3). During martial law, CRS data on accounts of a Ukrainian citizen with a total balance of up to USD 250,000 on 31 December cannot be used to assess tax (section XX, subsection 10, para. 53-1).

Confirm with a local adviser: that martial law is still in force on the date you rely on the moratorium, whether Estonia and Ukraine exchange CRS data with each other, and whether the annual return must list the shares or foreign accounts.

How do I prove residence to get the treaty rates?

A Ukrainian payer applies a treaty rate only if the OÜ gives it a certificate of Estonian residence, issued by the Estonian authority, legalised and translated as Ukrainian law requires, and the OÜ is the beneficial owner (Tax Code art. 103.2 to 103.5). A certificate for the previous year can be used, with the current one supplied after the year ends (art. 103.8). Without a certificate, the payer withholds the full Ukrainian rate, and the OÜ claims the excess back through the payer's tax authority (art. 103.10, 103.11).

The OÜ compiles a certificate of residence and tax liability in e-MTA, or applies by the online form or at a service bureau. EMTA issues it "within 5 working days", in Estonian, Russian or English, for a date, a period or a year, but not for a future period. Select Ukraine as the tax treaty country (EMTA).

For relief in Estonia, a Ukrainian resident gives EMTA a certificate of residency confirmed by the Ukrainian tax authority (form TM3; EMTA). An Estonian payer applies a lower treaty rate only with such a document (TuMS § 43 lg 2 and 3). You get your certificate of Ukrainian residence from the Ukrainian tax authority (Ombudsman of Ukraine).

Confirm with a local adviser: whether the Ukrainian payer accepts the digitally stamped EMTA certificate, or wants a paper certificate with an apostille and a Ukrainian translation.

Can Ukraine deny my company treaty benefits as abusive?

Yes, on two levels:

• Since the MLI took effect, the treaty has a principal purpose test: no benefit if getting it was one of the principal purposes of the arrangement, unless it fits the object and purpose of the treaty (MLI Art. 7(1), which replaces the treaty's own anti-abuse rule in Art. 24). It applies to withholding from 01.01.2022. The MLI also adds an anti-abuse preamble (MLI Art. 6(1)). The relief by the tax authority after a denial (MLI Art. 7(4)) does not apply, because Estonia did not choose it.
• Ukrainian law gives a reduced rate only to a beneficial owner, and refuses it where the main purpose of the transaction was to get the treaty benefit (Tax Code art. 103.2, 103.3). A benefit must survive both tests.

The risk is concrete for a holding OÜ with one Ukrainian subsidiary, owned by a person living in Ukraine. The 5 percent dividend rate and the 10 percent cap on interest and royalties can be denied if the OÜ has no business reason beyond the treaty rate. Estonia has its own general anti-abuse rule (TuMS § 5^1; MKS § 84). Document the business reasons and substance of the OÜ (EU clients, staff, decisions in Estonia) before a Ukrainian company pays it.

What can I do if both countries tax the same income?

You can start a mutual agreement procedure. Since 25.12.2021, you can present the case to the tax authority of either state (Art. 26(1) of the treaty, as changed by MLI Art. 16(1)), within three years from the first notice of the action that taxes you against the treaty. An agreement is carried out whatever the domestic time limits (Art. 26(2)). There is no arbitration, and the EU dispute directive does not apply to Ukraine.

In Ukraine, you apply to the competent authority (Tax Code art. 108-1). After an audit, you file within 10 working days of the decision on an administrative appeal, and at the latest 1095 days after the tax liability became agreed. A pending appeal or a court judgment on the same issue is a ground to refuse the procedure. A domestic administrative appeal is due within 10 working days of the tax notice (Tax Code art. 56.3), so choose early.

In Estonia, an objection against an EMTA decision is due within 30 days (MKS § 137, § 138 lg 1). Once a mutual agreement procedure starts, the deadlines for an objection and for an appeal to the administrative court are suspended until it ends (MKS § 138 lg 3).

Confirm with a local adviser: which Ukrainian body handles the application and what it must contain. The treaty's three years and Ukraine's 1095 days run from different events, so file within the shorter one.

Does the MLI change this treaty, and from when?

Yes. Both states list the treaty, so it is a Covered Tax Agreement. The MLI is in force for Ukraine from 01.12.2019 and for Estonia from 01.05.2021. It:

• adds the MLI anti-abuse text to the preamble (MLI Art. 6(1));
• replaces Art. 24 with the principal purpose test (MLI Art. 7(1));
• replaces Art. 13(2) with the rule on land-rich shares: more than 50 percent of value from real estate at any time in the 365 days before the sale (MLI Art. 9(4));
• lets you present a mutual agreement case to either state, and lets the two authorities consult on cases the treaty does not cover (MLI Art. 16).

It has effect for withholding taxes from 01.01.2022 in both states, and for other taxes for periods from 25.06.2022 in Ukraine and from 01.01.2023 in Estonia. The mutual agreement changes apply to cases presented from 25.12.2021. The MLI does not change residence (Art. 4), permanent establishment (Art. 5) or the elimination of double taxation (Art. 23). The Ministry of Finance publishes a synthesised text (Ministry of Finance). It is not an authentic text: the treaty and the MLI are.

General information, not advice for your situation. The law as in force on 01.10.2026.