Cyprus and Ukraine to sign new Double Tax Agreement

Cyprus and Ukraine to sign new Double Tax Agreement

A version of a new double tax treaty between Ukraine and Cyprus has been leaked to the media. The new treaty has not yet been published officially, but most expect it to replace the current treaty which is a legacy from the Soviet era.

The new treaty is expected to be modeled on the OECD (Organisation for Economic Co-operation and Development) convention.

The current treaty imposes no tax in Ukraine for income received in the country by Cyprus based investors. The new treaty will withhold taxes dependent on the type of income earned in Ukraine by Cypriot-held investments. Royalties will be taxed at 5 to 10 percent depending on the type of IP license held, Interest will be taxed at 2%, while Dividends will be taxed at 5% for those meeting certain minimum stake or investment levels. Those Cypriot entities not holding the minimum 20% stake, nor having a total investment of at least 100,000 EUR will be taxed at 15%.

Although the new taxes to be implemented is unfavorable to existing Cypriot held investments, the new tax regime will still be competitive against other countries with which Ukraine has bilateral agreements. Additionally, the new treaty has provisions that will be beneficial to Cypriot investors who wish to invest in Ukraine real estate.

This new Agreement will take effect one year after its ratification. Thus, most expect that the double tax treaty will be in force in 2014 at the earliest.

Source: www.kyivpost.com

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