On 16 January 2020, the Ukrainian Parliament adopted Law No 1210 on amendments to the Tax Code of Ukraine with regard to improvement of tax administration, elimination of technical and logical discrepancies in tax legislation. The important changes in the Law are as follows:
Controlled Foreign Companies (CFC)
The draft law introduces a new term into current legislation of Controlled Foreign Company (CFC), where a company is incorporated outside Ukraine, but is legally controlled by a resident of Ukraine. The controlling person must pay corporate income tax or personal income tax on the income earned by the CFC, even if it has not yet been distributed. This will be effective from 1 January 2021.
Withholding tax on capital gains
A Ukrainian company will be subject to 15% withholding tax for capital gains on foreign sales of shares or corporate rights, if not provided in double tax treaty with other country. This will be effective from 1 July 2020.
Thin Capitalization
The new rule would apply to transactions with related and unrelated persons if the debt is greater than 3.5 times the company’s equity. Thin capitalization rules will no longer apply to lease companies and financial institutions.
Dividends
Certain payments to nonresidents would be treated as dividend-equivalent payments subject to a 15% withholding tax.
