Corporate Tax 2010 - BMR Advisors

Chapter 47
Ukraine
Bate C. Toms
BC Toms & Co
Anna Kvederis
1 General: Treaties
1.1 How many income tax treaties are currently in force in
Ukraine
As of 25 September 2009, Ukraine has 65 income tax treaties in force.
Five of these treaties, those with Cyprus, Spain, Malaysia, Mongolia
and Japan, were entered into with the USSR and are still applied by
Ukraine as a legal successor of the USSR. 60 of the treaties were
entered into by Ukraine, including three new Ukrainian treaties that
came into force in 2008 and 2009 with Iceland, Jordan and Morocco
(the provisions of the Ukraine-Morocco Tax Treaty will only be
applicable in Ukraine starting from 1st January 2010). New treaties
with Cuba and Mongolia (to replace currently applied Soviet treaties)
have been ratified by Ukraine, but have not yet entered into force, and
treaties with Luxemburg and Singapore have been signed but not yet
ratified by Ukraine (the Luxembourg treaty is no longer expected to be
ratified in the near future). On 21 February 2007, the Ukrainian
Government authorised the Ministry of Finance of Ukraine to
conclude a new double tax treaty between Ukraine and Cyprus to
replace the USSR-Cyprus treaty that is still being applied by Ukraine,
and a text for a new treaty has apparently been agreed in negotiations
though it has not yet been signed or officially published.
anti-treaty shopping rules, generally following the U.S. Model
Treaty. The treaty with the United Kingdom includes a “limitation
of benefits” article.
Under certain other treaties, particularly the recent ones, only a
“beneficial owner” of income may claim certain treaty benefits,
such as reduced or eliminated tax rates for interest, dividends and
royalty payments. In practice, however, presently these standards
are applied in a formalistic way, with legal owners presumptively
treated as beneficial owners, so in practice the limitations have not
been enforced so as to actually prevent the use of treaty benefits.
This may change in the future.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
Under the Constitution of Ukraine, duly ratified international
treaties constitute an integral part of Ukrainian legislation. Thus,
under the Constitution of Ukraine, provisions of treaties and
domestic legislation have the same legal force, which presumably
permits the application of the later-in-time rule. However,
Ukrainian tax statutes currently in force explicitly provide that in
the case of a conflict between the provisions of ratified treaties and
domestic laws, the provisions of the treaties prevail.
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1.2 Do they generally follow the OECD or another model
Generally, Ukrainian income tax treaties are based on the OECD
Model Treaty, with certain variations. The income tax treaties entered
into by the USSR that are still applied by Ukraine, as noted above, are
simpler in structure, do not limit their benefits to the “beneficial
owners” of income and are, in principle, more favourable than the
treaties entered into by Ukraine. The tax treaty with the USA also
stands apart, as it generally follows the U.S. Model Treaty.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
In order to enter into force, an income tax treaty has to be ratified
by the Ukrainian Parliament (Verkhovna Rada), and then the
ratification instruments have to be exchanged with the other
country.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
The treaty between Ukraine and the USA contains comprehensive
2 Transaction Taxes
2.1 Are there any documentary taxes in Ukraine
Ukraine does not have a stamp duty in the traditional sense.
However, certain transactions in Ukraine are subject to a State duty
and payments to the State pension fund.
The State duty is payable for the notarisation of contracts and
unilateral deeds and the filing of documents with courts. The
documents subject to mandatory notarisation, and thus to the
payment of such State duty, include contracts for the sale or other
disposition of buildings, land and other real estate, mortgage and
property management agreements, real estate lease agreements for
a duration exceeding three years, agreements for the foundation of
a joint stock company where an individual is involved, agreements
for the leasing of vehicles to an individual and certain powers of
attorney and wills.
The parties to a contract may also choose to notarise it even if this
is not mandatory, for example to evidence its execution. In this
case, they will have to pay the State duty.
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