The Ukrainian parliament is currently being finalized for submission to the discussion of the draft law on ratification of the Protocol amending the Convention between the Government of Ukraine and the Government of the Republic of Cyprus for the avoidance of double taxation and prevention of tax evasion on income tax. This Protocol provides for changes in the taxation of dividends, interest on loans, as well as the alienation of the property income.
With regard to dividends, the top rate will be reduced from 15 to 10%. But lower tax rate – 5% survive only if ownership of at least 20% of the capital of a legal entity. But how exactly a person – remains a mystery, as in the original text of the Protocol stated “Partnership About”, ie the “Partnership”, while the bill “Partnership About” translated as “Society”. As such, this provision leaves room for corruption because it allows you to abuse the tax authority in determining the rate that must be applied by the payer.
The rate of taxation of interest on loans increased from 2% to 5%.
Changes are also proposed concerning the taxation of income from the alienation of shares and corporate rights. Unfortunately, due to the incorrect translation of the original text of the Protocol difficult to understand the content of the article, but it is apparent attempt to tax such income on the territory of Ukraine, in some cases. For example, the alienation of shares of a closed joint-stock company, or, if in another contracting country, such income is not taxed (in Cyprus the tax rate on such transactions – 0%).
Regarding royalties, payment of which is carried out by residents of Cyprus – the rules have not yet changed, accordingly it is an opportunity for tax optimization.
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