On September 7, at the morning session of the Verkhovna Rada, the Law “On the amendments to the Tax Code of Ukraine regarding the taxation of the incomes of non-residents investors in the securities” was adopted. We remind that clause 141.4.10 of article 141 of the TCU stipulates that interest or income (discount) of non-residents from government securities, bonds of local loans or debt securities are not subject to taxation which fulfillment of obligations is guaranteed by the state or local guarantees. Such provisions positively influence on making decisions by the foreign investors (creditors) on the purchase of Ukrainian government securities and investing in the economy of the country. However, according to the Explanatory note, to the draft of the above Law, the issue of taxation of other income from securities is not fully regulated by the provisions of this paragraph (for example, income from repurchase or exchange operations at the expense of the state or local budget, which is not a percentage or a discount). The taxation of such incomes will “reduce the investment attractiveness of relevant types of securities and their competitiveness in the capital market,” which may negatively affect the ability of their issuers to conduct transactions with state (local) debt, including the exchange, issue, purchase, repurchase and sale of government debt liabilities, subject to meeting the limit of debt at the end of the budget period. Thus, the introduction of changes to the certain provisions of the TCU is conditioned by the need to resolve this issue and avoid discrepancies. The adoption of the Law will allow to exempt from taxation:
- income of a foreign investor on government securities and local loan bonds paid by the central executive authority that ensures the formation and implementation of the financial state policy, or their issuer;
- income of a foreign investor from the operations with debt securities, under which the fulfillment of obligations is secured by the state or local guarantees, if such incomes are paid by the relevant guarantor.
