close
Share with your friends

Ukraine ratified the protocols to the double tax treaties with Cyprus and the UK

Double tax treaties

On 30 October 2019 of Ukraine ratified the protocols to the double tax treaties with Cyprus and the UK.

1000
oleksandr-boboshko

Director, Tax & Legal

KPMG in Ukraine

Contact

Related content

Protocol to the Convention with Cyprus

1. The tax rates have been changed:

  • Dividends

5% tax rate applies if both criteria are met: (1) the beneficial owner of the dividends is a company (other than a partnership) which holds directly at least 20% of the capital of the company paying the dividends and (2) invested in the acquisition of the shares or other rights of the company equivalent of at least EUR 100,000. In other cases 10% tax rate is applied.

  • Interest

Preferential 2% tax rate is increased to 5%.

2. Capital gains tax rules are amended:

  • If gains derived by a resident of a Contracting State from the alienation of shares derive more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State (e.g. Ukraine), such dividends may be taxed in that other State (e.g. Ukraine).

Such dividends may not be taxed in state where the immovable property is situated (e.g. Ukraine), if the shares are listed on an approved stock exchange, gains are derived in the course of a corporate reorganization, or the business is carried on in immovable property from which the shares derived their value etc.

  • Gains from alienation of other property (e.g., shares that do not derive more than 50% of their value directly or indirectly from immovable property) will be taxable only in the Contracting State of which the alienator is a resident provided that those gains are subject to tax in that Contracting State.

Protocol to the Convention with Cyprus enters into force on the date of the latter of the notifications made by Ukraine/Cyprus on the ratification of the Protocol to the Convention with Cyprus, and has effect from 1st  January of the calendar year following that in which this Protocol enters into force.

Protocol to the Convention with the UK

1.  Principal Purpose Test, pursuant to which a benefit under the Convention with the UK shall not be granted in respect of an item of income, including dividends, interest, and royalty, or a capital gain if obtaining that benefit was one of the principal purpose of any arrangement or transaction that resulted directly or indirectly in that benefit.

2.  Requirement that the recipient of the dividends, interest, royalties must be subject to tax in respect of such income in the state of its residency in order to apply preferential tax rates is abolished.

3.  The tax rates have been changed:

  • Dividends

5% tax rate applies, if the beneficial owner of the dividends is a company, which holds directly or indirectly at least 20% of the capital of the company paying the dividends.

Preferential tax rate was increased from 10% to 15%.

  • Interest

Preferential 0% tax rate is increased to 5%.

  • Royalty

Preferential 0% tax rate is increased to 5%.

4.  Tax information exchange mechanism between Ukraine and the UK was enhanced.

Protocol to the Convention with the UK enters into force on the date of the latter of the notifications made by Ukraine/the UK on the ratification of the Protocol to the Convention with the UK, and has effect for Ukraine from 1st  January of the calendar year following that in which this Protocol enters into force.

KPMG recommends analysing the impact of the above-specified amendments on your current group structure, as well as on certain cross-border payments to be made to residents of Cyprus or the UK, taking into account the following:

  • background for application of the conventions within the current group structure and payments;
  • compliance with the “Principal Purpose Test”;
  • available options to reduce tax risks for the current group structure and payments (if any) that may arise upon implementation of the protocols etc.

If you are interested in obtaining advice on impact of the above protocols on the current corporate group structure or you have any concerns on application of the reduced tax rates to certain cross-border payments or other international tax issues, we are pleased to schedule free of charge call with Oleksandr Boboshko, Head of International Tax Practice, Director of KPMG in Ukraine.

Connect with us

  • Find office locations kpmg.findOfficeLocations
  • kpmg.emailUs
  • Social media @ KPMG kpmg.socialMedia
 

Want to do business with KPMG?

 

loading image Request for proposal