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 withholding at the standard 15% rate. However, the terms of an applicable tax treaty must also be considered and will prevail over domestic law. As...