Ukraine: STS clarifies royalty withholding tax received from US

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The State Fiscal Service published Guidance Letter No. 722/6/99-99-01-02-02-15/IPK on 19 July 2017 clarifying the royalty withholding tax paid by a US distributor to a Ukrainian software copyright holder.

Ukraine’s State Fiscal Service (“SFS”) discussed different arrangements between the software copyright holder and the software distributor and the extent to which a payment to each would qualify as a royalty under Article 12 of the Ukraine – United States treaty and be subject to a 10% withholding tax.

The letter noted that to claim treaty benefits a non-resident entity needs to provide the tax agent with a document confirming residency in a treaty country.  For a US entity making payments to a Ukrainian software copyright holder, IRS Form 6166 would work to establish US tax residency.


Canada: FTA with Ukraine enters into effect on August 1, 2017

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The Free Trade Agreement between Canada and Ukraine will enter into force on 1st August 2017. As per previous discussion, from August 1, 2017, the agreement will cut 98% of the tariffs for Ukrainian exports to Canada and 72% of the tariffs from Canada to Ukraine. This agreement had been signed on July 11, 2016. The law on ratification was signed on April 3, 2017 by the President of Ukraine.

Ukraine: European Parliament increases quotas for Ukrainian agricultural products

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The European Parliament has approved a package of additional trade concessions for Ukraine, designed to increase trade flows and foster the country’s economic development.

The preferences will be introduced for a period of up to three years as a supplement to the Deep and Comprehensive Free Trade Area (DCFTA) with the European Union. The EU is now offering additional trade concessions in view of Ukraine’s economic difficulties and its efforts to reform. Parliament agreed to permit the import into the EU of a range of Ukrainian agricultural products within limited zero-tariff quotas.

As reported, after negotiations between the European Commission, the Council of the European Union and MEPs the European Parliament’s Committee on International Trade (INTA) proposed to increase quotas on Ukrainian honey by 2,500 tonnes, preserved tomatoes by 3,000 tonnes, grape juice by 500 tonnes, oats by 4,000 tonnes, wheat by 65,000 tonnes, maize by 625,000 tonnes, barley by 325,000 tonnes and groats and pellets of certain cereals by 7,800 tonnes.

Ukraine: The Ministry of Finance publishes a route map for the implementation of the BEPS Action Plan

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On 16 May 2017, the Ministry of Finance published a route map for the implementation of the BEPS Action Plan and presented it to experts.

Minister of Finance Oleksandr Danyliuk said that the government must ensure that profit tax is collected where added value is generated and where business activity is pursued. They will be resisting deliberate profit shifting aiming to evade taxes in Ukraine.

On January 1, 2017, Ukraine joined the Extended Cooperation Program of the OECD and obliged itself to implement the so-called minimum standards of the BEPS Action Plan. The implementation of the minimum standards will enable Ukraine to effectively tackle aggressive tax planning, base erosion and profit shifting.

Ukraine: STS clarifies the definition of related parties for the recognition of controlled transactions

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On 16 May 2017, the State Fiscal Service of Ukraine published a letter No. 9012/6/99-99-15-02-02-15 concerning the definition of related parties for the recognition of transactions controlled and guided by article 52 of the Tax Code of Ukraine.

The letter clarifies that for the purpose of the transfer pricing rules, a resident entity and non-resident entity will be deemed related if the entity directly and / or indirectly owns corporate rights in each such legal entity in the amount of 20 percent or more.

Ukraine: Cabinet of Ministers adopts the changes to advance pricing agreements

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The Cabinet of Ministers of Ukraine on March 29, 2017 adopted amendments to the Regulation No. 504 of 17 July 2015 regarding the procedure of issuing advance pricing agreements (APAs).

According to the adopted amendments to the Regulation No. 504 of 17 July 2015, an APA will become effective on the date agreed by the State Fiscal Service and a taxpayer (depending on the terms and conditions of the controlled transactions) or on 1 January of the year following that in which the APA was signed.

The validity of an APA is extended from 3 to 5 years.

Ukraine ratifies the DTA with Malta

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On 1 May 2017, Mr. Petro Poroshenko, the President of Ukraine signed a law ratifying the Double Taxation Agreement (DTA) with Malta.

Under the provisions of the treaty, the withholding tax on dividend income shall not exceed 5% of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 20 per cent of the company paying the dividends and 15% of the gross amount of the dividends in all other cases. For interest and royalty income a maximum 10% withholding tax applies.