Tax residency of individuals in Ukraine: issues related to the application of criteria and their impact on tax jurisdiction

Анотація

The aim of the work is to prove, through a comparative legal analysis, the inefficiency and non-compliance with international standards of the current model for determining the tax residency of individuals in Ukraine, and to develop proposals for its legislative improvement.

The methodological basis of the study includes the comparative legal method, used to analyze the legislation of foreign countries and Ukraine; the formal-dogmatic method for interpreting the norms of the Tax Code of Ukraine and the OECD Model Convention; as well as general scientific methods of analysis and synthesis to formulate the findings and proposals.

Results. The study found that, contrary to common international practice, the Tax Code of Ukraine integrates a hierarchical system of tests into its national definition of a tax resident. This structure almost completely replicates the conflict-resolution mechanism (“tie-breaker rules”) from Article 4 of the OECD Model Convention. It has been proven that this approach constitutes an unjustified “self-limitation” of Ukraine’s tax jurisdiction, as the state preemptively cedes its right to tax an individual even before an international treaty is applied. This creates a significant risk of reducing the tax base for personal income tax.

Conclusions. It is concluded that the current definition of a tax resident in Ukraine is inefficient and requires revision. The author substantiates the proposal to amend the Tax Code of Ukraine by removing the sequential tie-breaker rules from the domestic definition. It is proposed to establish a clear list of primary, alternative criteria (e.g., permanent home, duration of stay), which will align Ukrainian legislation with international best practices, expand the state’s tax base, and simplify tax administration.