12.11.2012
05 November 2012 the Cabinet of Ministers of Ukraine approved a new agreement with
Cyprus on avoidance of double taxation. Sign the relevant documents authorized by the Minister of foreign Affairs Kostiantyn Hryshchenko.
This agreement, in particular, allows Ukraine to collect taxes from the enterprises, registered in
Cyprus, according to the Ukrainian legislation. This will include the purchase and sale of property, receipt of dividends and royalties.
The Convention provides the introduction of the rate of 5% instead of zero taxation of dividends if the owner owns not less than 20% of the capital of the company or invested not less than 100 thousand Euros in purchase of shares. In all other cases the tax rate will be 15%.
Royalties will be subject to the 10% tax (now 0%), income from debt-claims - 2% (0%). All other income from the disposal of property, employment, pensions, Directors ' fees - can be taxed on the law of the state party.
For the entry into force agreement still must pass the ratification of both parties.
Expert’s opinion
The new Convention between Ukraine and
Cyprus will replace the existing Agreement between the Government of the USSR and the Government of Cyprus on avoidance of double taxation of income and property, signed by a further 29 October 1982. Thus, it took 30 years of waiting and long negotiations, to come to this.
On the one hand, investors will have a guarantee that their income from business activities shall not be taxed twice.
On the other - all the new rates are extremely unprofitable for the Cypriot side. This will lead to the fact that
Cyprus will lose its attractiveness for investors and will be replaced by other countries, such as Switzerland.
Who exactly would benefit from this agreement, so that the budget of Ukraine. After all, cash flows, which are transferred every year to
Cyprus, are very significant. In addition, there will be compensated the negative impact of the Agreement related to unjustified tax benefits granted.
Whatever it was, the agreement still must pass the ratification in the Parliament of
Cyprus and in the Verkhovna Rada. The latter, moreover, need to denounce the old agreement.
Nazarova Yulia ( Paralegal of Moscow office Company Honest&Bright)
