15.01.2016. Amended Double Tax Treaty – Cyprus & Ukraine

Company News

The Ministry of Finance of the Republic of Cyprus issued an announcement that on December 11th 2015 in Kiev, the amended agreement for the avoidance of the double taxation between Cyprus and Ukraine was signed.

It is to be noted that during the negotiations a most “favourable nation clause” has been adopted regarding interest, dividends, royalties and capital gains.

The aforementioned clause means that Cyprus will be treated on equally favourable terms with all the other States having agreements with Ukraine.

The agreement provides among others for the following:

  • Dividends
    • Under the provisions of the new double tax treaty, in order to benefit from the reduced rate of 5%, the beneficial owner must fulfill both of the following conditions (and not only one, as previously):
      • own more than 20% of the shares.
      • have invested more €100,000 in the share capital.
  • Interest
    • The withholding tax on interest, under the amended Double Tax Treaty, will increase from 2% to 5%.
  • Capital gains
    • Under the provisions of the current agreement, capital gains derived from the disposal of immovable assets are taxable only in the country of residence of the seller. The new Double Tax Treaty provides that the capital gains will be also taxable in the country where the asset is situated.

After its ratification by both countries, the signed agreement is expected to come into force, after the expiration of the existing treaty, on the 1st January 2019 (or later).