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Cyprus - Ukraine new Double Tax Treaty
08.07.2013
业务领域: 税法业务

On 4 July 2013, the Ukrainian Parliament ratified the new Convention between Cyprus and Ukraine for the avoidance of double taxation and prevention of fiscal evasion, as well as a protocol to the Convention (together the “Treaty”), which were signed by the two countries on 8 November 2012. The Treaty will come into force on 1 January 2014 and on that date the old Cyprus – USSR treaty of 1982 will cease to apply as between the two countries .

The following is a summary of the new Treaty’s most important provisions and the most significant changes from the old Cyprus – USSR treaty:

Place of effective management

Article 4 follows the OECD Model and applies the “place of effective management” test in order to determine the tax residency status of a company or a person.

Income from immovable property

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

Profit from the sale of shares in a company which is a resident of a CS but owns land in the other CS, are taxed in the CS where the seller is a tax resident. 

Dividends

Dividends paid by a company which is a resident of a CS to a resident of the other CS may be taxed in that other CS.

Pursuant to the Cyprus – USSR treaty there was zero withholding tax on dividend payments made by a resident of one CS to a resident of the other CS. Under the new Treaty the withholding tax on the payment of dividends will be capped at 5% if the beneficial owner holds at least 20% of the capital of the dividend paying company or has invested in shares the equivalent of at least Euro 100,000. In case these conditions are not met, the withholding tax is capped to 15%.

Interest

Interest arising in a CS and paid to a resident of the other CS may be taxed in that other CS if such resident is the beneficial owner of this interest.

Pursuant to the Cyprus – USSR treaty there was zero withholding tax on interest payments made by a resident of one CS to a resident of the other CS. Under the new Treaty the withholding tax on payment of interest will be capped at 2% provided the beneficial owner of the interest income is resident of the other CS.

Royalties

Royalties arising in a CS and paid to a resident of the other CS may be taxed in that other CS.

Pursuant to the Cyprus – USSR treaty there was zero withholding tax on royalties payments made by a resident of one CS to a resident of the other CS. Under the new Treaty the withholding tax on the payment of royalties is 5% in case of royalties arising from the copyright of scientific work, any patent, trade mark, secret formula, process or information concerning industrial, commercial or scientific experience and 10% for any other royalties.

Directors’ fees

Article 15 provides that Directors' fees and other similar payments derived by a resident of a CS in his capacity as a member of the board of directors of a company which is a resident of the other CS may be taxed in that other CS.

Exchange of information

Article 24 introduces a new wording of “exchange of information” which is in accordance with the OECD Model.

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