Law of Ukraine

On Ratification of the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income between Cyprus and Ukraine and Protocol Thereto

Date of entry into force:
August 6, 2013

The Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income between Cyprus and Ukraine (hereinafter referred to as Convention) and Protocol Thereto (hereinafter referred to as Protocol) were signed on November 8, 2012 in Nicosia.

The Law ratifies the Convention and the Agreement.

According to Article 2 of the Convention, it shall apply to taxes on income imposed on behalf of the Contracting State or their administrative and territorial units, or local authorities, irrespective of the manner in which they are levied. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, and taxes on the total amount of wages or salaries paid by companies. The existing taxes to which the Convention shall apply are, in particular:
  • in the case of Ukraine: 1) enterprise income tax; 2) natural person income tax (hereinafter referred to as Ukrainian tax);
  • in the case of Cyprus: 1) income tax; 2) corporate income tax; 3) special defense contribution; 4) property alienation tax (hereinafter referred to as Cyprus tax).
The Convention shall apply also to any identical or substantially similar taxes which are imposed by either of the Contracting States after the date of signature of the Convention in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

Article 4 of the Convention provides that for the purposes of this Convention, the term resident of a Contracting State means: any person who, under the laws of that State, is liable to tax therein by reason of the person's domicile, residence, place of management, place of incorporation or any other criterion of a similar nature, as well as that State or an administrative territorial unit or local authority thereof. This term does not include a person liable to tax in such State only in respect of incomes received from sources of income or property situated in such State.

Permanent establishment is determined by Article 5 of the Convention.

Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State (Article 6 of the Convention).

According to Article 7 of the Convention, the business profits of a resident of a Contracting State shall be taxable only in that State unless the resident carries on business in the other Contracting State through a permanent establishment situated therein. If the resident carries on business as aforesaid, the business profits of the resident may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

Profits derived by a resident of a Contracting State from the operation of river or sea ships or aircraft in international traffic shall be taxable only in that State (Article 8 of the Convention).

The specifics of taxation of associated persons are established by Article 9 of the Convention.

Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State (Article 10 of the Convention).

According to Article 11 of the Convention, interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State of the recipient is the beneficial owner of such interest. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 2% of the gross amount of the interest. The method of imposing such restrictions is established by the competent authorities of the Contracting States by mutual agreement.

Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed 10% of the gross amount of the royalties. The procedure for imposing such restrictions is established by the competent authorities of the Contracting States by mutual agreement (Article 12 of the Convention).

According to Article 13 of the Convention, incomes derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State. Incomes derived from the alienation of movable property that is part of the property of a permanent establishment of the resident of a Contracting State in the other Contracting State, which include such incomes from alienation of such permanent establishment (separately or together with the entire resident company) may be taxed in that other State. Incomes derived from the alienation of ships or aircrafts used in international traffic by a resident of a Contracting State, or of movable property related to the operation of such ships or aircraft, are taxed only in such Contracting State.

Articles 14-20 of the Convention regulate the specifics of taxation for:
  • wages and salaries;
  • director fees;
  • incomes of artistes and athletes;
  • pensions;
  • wages of government servants;
  • payments received by students or apprentices for the purposes of maintenance, education or training;
  • other incomes.

Article 21 of the Convention determines the procedure for avoiding double taxation.

The nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision also applies to persons that are residents of one or neither Contracting State. Stateless persons that are residents of a Contracting State shall not be subjected in either Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of the respective State in the same circumstances are or may be subjected. The taxation on a permanent establishment which a resident of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on residents of that other State carrying on the same activities. Interest, royalties and other amounts paid by a company which is resident of a Contracting State to a resident of the other Contracting State are deducted from the taxable income of such company, on the same terms as if they were paid to a resident of the first-mentioned State. Therefore, any debts of a company which is a resident of a Contracting State before a resident of the other Contracting State are deducted from the taxable capital of such company, on the same terms as if they were the debts before a resident of the first-mentioned State. Companies which are residents of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar companies which are resident of the first-mentioned State are or may be subjected (Article 22 of the Convention).

The mutual agreement procedure is envisaged by Article 23 of the Convention.

The competent bodies of the Contracting States shall exchange information required to observe the provisions of the Convention or their national legislations related to taxes of any type and designation, imposed on behalf of the Contracting States, or their administrative and territorial units, or local authorities, insofar as that taxation does not contradict the Convention (Article 24 of the Convention).

The Protocol establishes that the requesting Contracting State shall provide the following information when making an information request under Article 24 of the Convention, in order to demonstrate the alleged conformance of the information to the request:
  • information about the person being checked or investigated;
  • application for the necessary information, including its nature and the form in which the requesting Contracting State wishes to receive information from the other Contracting State;
  • tax purpose for which information is being requested;
  • reasons to believe that the requested information is possessed by the receiving Contracting State, or possessed or controlled by a person within the jurisdiction of such receiving Contracting State;
  • insofar as it is known, the name and address of any person considered to be in possession of the necessary information;
  • confirmation that the request conforms to the legislation and administrative practice of the receiving Contracting State, so that, if the requested information lies within the jurisdiction of the receiving Contracting State, its competent bodies are able to procedure information according to the legislation of the receiving Contracting State or in the course of the usual administrative practice, and that it conforms to the Convention;
  • confirmation that the requesting Contracting State has exhausted all available methods to procure the information within its territory, except those that would result in disproportionate inconvenience.
Information requested by a Contracting Party shall not be provided if the receiving State has no mutual provisions and/or does not employ the appropriate administrative practice for providing requested information.
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