On 4 July 2018, the President of Ukraine presented to Parliament the draft law “On amendments to the Tax Code of Ukraine concerning the tax on the withdrawn capital”. The draft law amends the tax law to replace the current corporate income tax system with a tax on distributed profits.
The tax on distributed profits would apply from 1 January 2019, although banks could be continued until 31 December 2021 under the current corporate income tax system. For dividends paid in 2018 and for dividends paid by banks, a derogation opt will continue until 31 December 2021 under the current tax regime.
The draft law proposed tax rates including 15% on profit distributions; 20% for operations that correspond to profit distributions; and 5% on debt securities to related parties where total non-resident related-party debt does not exceed 3.5 times equity (10 times for banks) and 20% if total non-resident related-party debt exceeds 3.5 (10) times equity or such payments are made to a resident of a low-tax jurisdiction.
