Timchenko Katerina Legal advice on doing business in Ukraine

Legal News: Ukraine Cyprus DTT 2013 is ratified and to be effective in 2014

7 August 2013

On 8 November 2012 Cyprus and Ukraine signed a new Double Tax Treaty (“DTT”), which was ratified on 7 August 2013 and is to enter into effect on the 1st of January 2014.  The new agreement is to replace the 1982 treaty for the avoidance of double taxation as concluded between Cyprus and the USSR.

The main amendments are change of rates of withholding tax for Dividend, Interest and Roalty Income. In DTT of 1982 the rate of tax was zero.

The new DTT provides the following tax rates:

Dividend Income

With regards to dividend income, the withholding tax rate will be 5%, with the beneficial owner holding at least 20% of the capital of the dividend paying company or invested at least €100.000 in the share capital or other rights of the dividend paying company. For all other cases the withholding tax rate will be 15%.

Interest Income

Any profits received by way interest payments shall bear a withholding tax of 2%.

Royalty Income

The withholding tax rate for Royalty income will be 5% on royalties arising from the use of any copyright of scientific work, trade mark, patent, secret formula, process or information concerns industrial, commercial or scientific experience. For all other cases the withholding tax rate will be 10%.

Capital Gains

The taxing rights for Capital Gains in respect to a disposal of shares in property companies or other movable property is granted to the State in which the person making the disposal is tax resident. This means that real estate holding groups will still benefit as with the current DTT, and have zero tax obligation.

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