Interactive Brokers and Ukrainian Investors: How to Pay Taxes Correctly

Interactive Brokers (IBKR) is the most popular foreign broker among Ukrainian investors. But unlike Ukrainian brokers, IB does not withhold Ukrainian PIT or military levy, and does not report to Ukraine's tax authority. Here's everything you need to know to stay compliant.

Why IB is not your Ukrainian tax agent

Interactive Brokers is a US/UK registered company with no obligation to act as a tax agent for Ukrainian individuals. This means:

• IB does not withhold Ukrainian PIT or military levy from your income;
• IB does not report to Ukraine's State Tax Service (DPS);
• The full responsibility for calculation, declaration, and payment of Ukrainian taxes is entirely yours.

IB only withholds US withholding tax from dividends of US companies — that is a separate tax paid to the US government, not Ukraine.

Two types of taxable income at IB

Dividends

Every time a company you own shares in pays a dividend, those funds arrive in your IB account. In Ukraine, they are taxed at 9% PIT + 5% military levy on the gross amount in UAH at the NBU rate. Details: Dividend Tax Guide.

Stock and ETF sales

Investment profit from selling assets is taxed at 18% PIT + 5% military levy on net profit in UAH. Details: Stock Tax Guide.

W-8BEN form: cut US withholding from 30% to 15%

If you haven't signed a W-8BEN form in your IB account, do it now. This form confirms your Ukrainian tax residency under the Ukraine-US double taxation treaty (in force since 2000), reducing withholding from 30% to 15% on US dividends.

Where to sign: Client Portal → Settings → Account Settings → Tax Forms → W-8BEN. The form is valid for 3 years.

Flex Query: your key data extraction tool

Flex Query is IB's data export mechanism that pulls granular account data in XML or CSV format. You need two types of data:

• Cash Transactions — all dividends and withheld taxes with dates and amounts;
• Trades — all buy/sell transactions with dates, quantities, prices, and P&L.

To set up: Client Portal → Reports → Flex Queries → Create New. Save your Query ID and generate a token (Reports → Flex Queries → Generate Token). Detailed step-by-step instructions with screenshots are in the FlexQuery Setup guide.

Form 1042-S: what it is and whether you need it for Ukraine

Interactive Brokers issues a Form 1042-S to clients each year — a US document confirming the amount of withholding tax withheld. It is intended for the US tax system (IRS) and is needed if you want to claim a refund of over-withheld tax from the IRS.

For calculating Ukrainian taxes, Form 1042-S is generally not needed — Flex Query data is sufficient, as each withholding transaction appears as a separate line in Cash Transactions.

Why a broker report is not a ready-made declaration

Interactive Brokers provides plenty of useful reports: Activity Statement, Flex Query, data on trades, dividends, taxes, and commissions. But none of them are designed for the Ukrainian tax declaration: amounts are shown in USD or other currencies, while the declaration requires UAH equivalents at the NBU rate on each transaction date and FIFO cost basis calculation.

Typical situations that complicate the accounting:

• multiple purchases of the same asset on different dates;
• partial sale of a position;
• dividends in different currencies;
• commissions and currency conversions;
• dividend reinvestment, splits, corporate actions.

With only a few transactions per year, you can do the math manually. But with dozens or hundreds, Excel quickly becomes unwieldy and the risk of errors grows.

Which documents to keep

Keep everything that confirms your transactions and income:

• the annual Activity Statement;
• dividend and trade reports (Flex Query);
• records of taxes withheld abroad;
• deposit and withdrawal documents;
• proof of foreign taxes paid, if you plan to claim a credit.

Don't leave this until the last day before filing: if you save reports regularly (after significant transactions, or at least monthly), preparing the calculation takes minimal time — and you'll have evidence of acquisition costs if the tax authority asks questions.

Step-by-step: from IB to Ukrainian declaration

1. Sign W-8BEN — reduces withholding from 30% to 15%.
2. Set up Flex Queries for dividends (Cash Transactions) and trades.
3. Download XML/CSV or connect the Flex API in the service.
4. Calculate PIT and military levy — manually or via Investor Tax.
5. File the declaration (Form F0100215) by May 1.
6. Pay the calculated tax by August 1.

Common mistakes Ukrainian investors make

• "IB already withheld the tax — nothing else is needed." The withheld tax goes to the US government, not Ukraine. Ukrainian PIT and military levy are paid separately.
• "The money hasn't left the broker, so there's no income." The tax obligation arises from receiving a dividend or selling an asset at a profit — not from withdrawing money to a bank account.
• Confusing sale proceeds with profit. Selling $5,000 worth of shares doesn't mean a $5,000 profit. Only the difference between proceeds and acquisition costs is taxed.
• Ignoring exchange rate effects. Even a zero P&L in USD can produce a taxable profit in UAH due to UAH depreciation.
• Missing small dividends. Even $1–5 dividend payments must be declared — there is no minimum threshold.
• Not filing when at a loss. If you conducted investment transactions during the year, you must file a declaration even if the result was negative.