Kyiv GMT
EY
+380 (44) 490-3000
Fax: +380 (44) 490-3030 Kyiv 01001 Ukraine
19A Khreschatyk Street
Principal Tax Contact and Business Tax Services Leader
Vladimir Kotenko
+380 (44) 490-3006
Mobile: +380 (67) 507-7369 Email: vladimir.kotenko@ua.ey.com
Business Tax Advisory, International Tax and Transaction Services –International Corporate Tax Advisory and International Tax and Transaction Services – Transaction Tax Advisory
Vladimir Kotenko
+380 (44) 490-3006
Mobile: +380 (67) 507-7369 Email: vladimir.kotenko@ua.ey.com
Igor Chufarov +380 (44) 492-8231
Mobile: +380 (67) 246-3751 Email: igor.chufarov@ua.ey.com
Iryna Kalyta +380 (44) 499-2420
Mobile: +380 (67) 536-0527 Email: iryna.kalyta@ua.ey.com
International Tax and Transaction Services – Transfer Pricing
Igor Chufarov
Global Compliance and Reporting
+380 (44) 492-8231
Mobile: +380 (67) 246-3751 Email: igor.chufarov@ua.ey.com
Vladimir Kotenko +380 (44) 490-3006
Mobile: +380 (67) 507-7369 Email: vladimir.kotenko@ua.ey.com Viktoriia Borysenko +380 (44) 490-3007 Mobile: +380 (67) 507-7361 Email: viktoriia.borysenko@ua.ey.com
People Advisory Services
Olga Gorbanovskaya
+380 (44) 490-3022 Mobile: +380 (67) 507-7362 Email: olga.gorbanovskaya@ua.ey.com
Halyna Khomenko +380 (44) 490-3028
Mobile: +380 (67) 463-0282 Email: halyna.khomenko@ua.ey.com
Indirect Tax – Customs and International Trade
Anton Melnyk
Legal Services
Borys Lobovyk
+380 (44) 490-3000
Mobile: +380 (93) 745-6497 Email: anton.melnyk@ua.ey.com
+380 (44) 490-3047
Mobile: +380 (67) 536-0521 Email: borys.lobovyk@ua.ey.com
Bogdan Malniev +380 (44) 499-3356 Mobile: +380 (67) 231-5330 Email: bogdan.malniev@ua.ey.com
The information in this chapter is current as of 1 January 2022. Special tax rules have been enacted for the period of martial law in Ukraine, which are briefly summarized in Section G. Martial law was introduced in Ukraine on 24 February 2022 by the Decree of the President of Ukraine “On Martial Law in Ukraine” No. 64/2022, duly approved by Verkhovna Rada of Ukraine.
A. At a glance
Corporate Income Tax Rate (%) 18 (a)
Capital Gains Tax Rate (%) 18
Branch Tax Rate (%) 18
Withholding Tax (%)
Dividends 15
Interest 0/5/15 (b)(c)
Royalties 15
Freight 6
Income from Discount Bonds 18 (d)
Insurance 0/4/12 (e)
In-kind Ukrainian-Source Income 15 (f)
Other Ukrainian-Source Income 15 (g)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0 Carryforward Unlimited (h)
(a) Special tax rates exist for insurance and lottery companies. (b) The following interest is exempt from withholding tax:
• Interest and income (discounts) received by nonresidents from state securi ties, municipal bonds or debt securities if these instruments are secured by state or municipal guarantees
• Other income from state securities, paid by the Ministry of Finance of Ukraine
• Interest payments to nonresidents on loans received by the state or to a municipal budget if they are reflected in the state or municipal budget or in the budget of the National Bank of Ukraine
• Interest on loans obtained by business entities if fulfillment of these loans is secured by state or municipal guarantees
(c) Withholding tax exemption is available for interest paid to nonresident lend ers on loans financed through the issuance of debt securities (interest on loan participation notes) on a stock exchange outside Ukraine. The following conditions apply:
• If the loan is obtained before 2017, the exemption applies if the funds provided as a loan were raised with the aim to provide (directly or indi rectly) a loan to a resident.
• If the loan is obtained in 2017 or 2018, the exemption applies if all of the following conditions are satisfied:
The qualifying debt securities are listed on a recognized stock exchange (currently, the list contains 21 stock exchanges in various jurisdictions, including the New York Stock Exchange, London Stock Exchange, Deutsche Boerse AG, Japan Exchange Group, Inc. and Singapore Exchange).
The funds provided as a loan were raised with the aim to provide (directly or indirectly) a loan to a resident.
The foreign interest recipient is not resident in a low-tax or non-transparent jurisdiction (see Transfer pricing in Section E for more details).
A reduced 5% withholding tax rate applies to interest from loans obtained from 2019 onward, subject to similar conditions.
(d) The tax base is calculated as the difference between the nominal value of the discount bonds and the acquisition value (purchase price) of the bonds on the primary or secondary stock market. Exemptions apply (see footnote [b] above).
(e) In essence, the tax on insurance payments is not a withholding tax, because the tax on insurance payments is not withheld from the payments remitted to the nonresident recipient, but is paid at the expense of the Ukrainian company
making the payments (that is, the economic burden of paying the tax is borne by the Ukrainian party).
The 0% rate applies to the following:
• Insurance and reinsurance payments to financially reliable nonresidents
• Insurance payments with respect to civil aviation passenger transportation
• Insurance payments to nonresident individuals under mandatory insurance agreements
• Insurance payments under Green Card insurance agreements (mandatory third-party liability insurance for car owners of states participating in the Green Card system)
• Reinsurance payments with respect to mandatory civil liability insurance of nuclear facility operators
The 4% rate applies to insurance payments to nonresidents under insurance agreements covering risks outside Ukraine (subject to exceptions). The stan dard 12% rate applies in all other cases.
(f) Payment of in-kind Ukrainian-source income is subject to 15% withholding tax under a gross-up formula provided in the Tax Code.
(g) Profit from disposal of state securities, municipal bonds or debt securities received by nonresidents is exempt from withholding tax if these instruments are secured by state or municipal guarantees (except for profit of nonresi dents from low-tax jurisdictions).
(h) Special rules apply to large taxpayers and to transfers of losses in the course of reorganizations. For further details, see Relief for losses in Section C.
B. Taxes on corporate income and gains
Corporate profit tax. Ukrainian legal entities (except for non profit organizations) are subject to corporate profit tax (CPT) on their worldwide income and gains. Foreign legal entities (except for organizations with diplomatic privileges or immunities) are subject to CPT if they receive Ukrainian-source income. CPT also applies to nonresidents who conduct business activity in Ukraine through a permanent establishment (PE) and/or receive Ukrainian-source income, and other nonresidents obliged to pay CPT in Ukraine.
Beginning 1 January 2022, foreign companies having a place of management in Ukraine are included in the list of CPT payers and taxed on their Ukraine-source income.
PEs. The Ukrainian tax law envisages that a PE could arise for a nonresident in Ukraine by virtue of a fixed place of business, provision of services through personnel, construction site and related supervisory activity, and dependent agent’s activity. The 2020 tax reform law has introduced several anti-Base Erosion and Profit Shifting (BEPS) initiatives, including changes to the Ukrainian PE rules. These changes extended and specified the scope of PE, introduced new rules for tax registration and taxa tion of nonresidents carrying out activity in Ukraine through PEs, and granted to the Ukrainian tax authorities additional powers with respect to PE detection and related tax administration, in cluding forceful tax registration of nonresidents, unscheduled tax audits, and tax seizure of nonresidents’ property located in Ukraine.
Rates of tax. The CPT rate is 18%.
Temporary CPT exemptions are available for the following cases, subject to qualifying conditions:
• For the aircraft industry: until 1 January 2025
• For large investment projects: within five consecutive years until 1 January 2035
• For profit of business entities engaged exclusively in the manu facturing of electrical vehicles, engines, batteries, and charges
for electric vehicles as well as of some other qualifying means of transportation: until 31 December 2035
• For agricultural producers engaged in breeding, rearing and production of poultry, ostriches and quails, except for rearing chickens, and chicken meat and eggs production: until 1 January 2027
A special tax regime is available for the information technology (IT) industry (see Diia City Regime in Section G).
Application of the simplified tax regime with 2% turnover tax is allowed for all taxpayers for the period of martial law in Ukraine (see Section G).
Capital gains. Capital gains are included in the pretax financial result and generally taxed at the regular CPT rate.
Special tax rules apply to capital gains derived from trading in securities. Profits from trading in securities are included in tax able profit. Losses from trading in securities, including losses on security revaluations, can be carried forward indefinitely to offset future income from such trading.
Starting 1 January 2021, new rules apply to capital gains from qualifying foreign-to-foreign direct and indirect transfers of realestate-rich Ukrainian companies. Nonresident buyers must regis ter with the Ukrainian tax authorities and administer withholding tax on such transfers. The applicable withholding tax rate is 15%, subject to treaty protection.
Administration. Under the general rule, taxpayers must report CPT quarterly on a cumulative basis. Annual CPT reporting is available for the following taxpayers:
• Newly incorporated companies
• Agricultural producers
• Companies with annual income, net of indirect taxes, of less than UAH40 million (approximately USD1,367,000)
Taxpayers that file only an annual return must submit it within 60 days after the year-end. If a taxpayer files tax returns quar terly, the quarterly tax returns must be submitted within 40 days after the end of the quarter, and the final annual return must be submitted within 60 days after the end of the year. Tax is payable within 10 days after the deadline for submitting the tax return.
Dividends. A company distributing dividends to its shareholders must pay an 18% advance corporate profit tax (ACPT) on the positive difference between the amount of dividends and taxable profit for the reporting year for which dividends are paid, pro vided that the tax liability for the year is settled (if unsettled, ACPT is levied on the whole amount of dividends). The tax is paid either before or at the moment of the dividend distribution. The ACPT is paid at the expense of the dividend payer and does not decrease the amount of dividends due to shareholders. In general, ACPT can be offset against the CPT liability of the taxpayer in the current period and subsequent periods.
Exemption from ACPT on dividends applies to the following dividends:
• Dividends paid to individuals
• Dividends paid by joint investment vehicles
• Dividends paid to shareholders of the taxpayer’s parent com pany, up to the amount of dividends received by the parent company from third companies
• Dividends paid to companies whose profits are exempt from tax, up to the amount of such exempt profits in the period for which dividends are paid
Ukrainian CPT payers do not include in their taxable profit divi dends received from other Ukrainian CPT payers (except for collective investment vehicles and companies whose profits are exempt from tax, up to the amount of such exempt profits). Payments of dividends are not deductible for CPT purposes.
Dividends distributed to nonresidents are subject to withholding tax at a rate of 15% (to be calculated under a gross-up formula if distributed in-kind), unless an applicable double tax treaty pro vides otherwise.
The following payments are considered equivalent to dividends:
• Any monetary or in-kind payments made by legal entities to their shareholders in relation to the distribution of part of or all their net profit
• Payments for securities (corporate rights) to related and other qualifying nonresidents in transactions falling under transferpricing control in the amount exceeding the arm’s-length level
• Value of goods (services) purchased from related and other qualifying nonresidents in transactions falling under transferpricing control in the amount exceeding the arm’s-length level
• Understatement of the value of goods (services) supplied to related and other qualifying nonresidents in transactions falling under transfer-pricing control in the amount below the arm’slength level
• Monetary or in-kind payments to nonresident shareholders in relation to reductions of share capital, buy-backs of the corpo rate rights, withdrawals from shareholding or similar transac tions between legal entities and their shareholders in the amount resulting in decrease of the retained earnings of the legal entity
The second through fifth payments above are considered equiva lent to dividends starting 1 January 2021 and are excluded from the scope of ACPT.
The application of double tax treaty protection to payments con sidered to be equivalent to dividends should be analyzed on a case-by-case basis.
Foreign tax relief. Ukrainian companies may credit foreign tax paid with respect to foreign-source profits against Ukrainian tax imposed on the same income, up to the amount of such Ukrainian tax. The credit is granted only if the taxpayer submits a written confirmation from the tax authorities of the foreign country that certifies payment of the foreign tax.
C. Determination of taxable profit
General. Taxable profit is defined as the financial result before tax, determined under Ukrainian accounting standards or under International Financial Reporting Standards, subject to
established adjustments. Add-back adjustments of the financial result for tax purposes include the following:
• Thirty percent of the cost of goods, including non-current as sets (except for purchased right-of-use assets under lease agree ments), works and services purchased from or supplied to nonresidents registered in low-tax and non-transparent jurisdic tions, nonresidents incorporated in specific legal forms that do not pay CPT and/or are not tax residents in their country of registration or purchased from nonprofit organizations if the amount of purchase from nonprofit organizations exceeds 25 minimum salaries (approximately USD5,555). This limitation does not apply to transactions falling under transfer-pricing control (see Transfer pricing in Section E) or if the taxpayer substantiates the arm’s-length level of the expenses/income under transfer-pricing rules.
• Royalties paid to nonresidents exceeding the sum of royalty income and 4% of the taxpayer’s net sales income for the pre ceding reporting year. The limitation does not apply to transac tions falling under transfer-pricing control or if the taxpayer substantiates the arm’s-length level of the royalties under transfer-pricing rules. In some cases, royalties are added back in full.
• Adjustments under the thin capitalization rules (see Debt-toequity ratios and other restrictions on the deductibility of inter est in Section E).
• Transfer-pricing adjustments.
• Provisions and allowances accrued in financial accounting (except for salary and payroll tax provisions).
• Funds or cost of goods, works or services provided to nonprofit organizations in an amount exceeding 4% (8% for sports nonprofit organizations) of the taxpayer’s taxable profit for the preceding year.
• Non-repayable financial aid, or the cost of goods, works or services provided for free, to entities (other than registered nonprofit organizations and individuals) that are not CPT payers or are CPT exempt, or to parties related to CPT payers (if the recipients of such aid declared tax losses for the previous reporting year, provided that the donor recognized such aid as expenses when determining its pre-tax financial result).
• Penalties under civil law contracts, compensation for damages and lost profit paid to non-CPT payers (except for individuals) or to CPT payers that enjoy CPT exemption, and fines and penalties imposed by tax and other authorities.
• Impairment of fixed assets and intangible assets.
• Losses from participation in the equity of other companies.
• Value of transactions falling under transfer-pricing control that are not recognized by the tax authorities due to a lack of busi ness purpose (see Transfer pricing in Section E).
Industry-specific adjustments apply for banks and financial insti tutions.
Tax-loss carryforwards decrease the pretax financial result for CPT purposes, subject to special rules for large taxpayers. Transferability of tax losses through a reorganization is limited.
If a taxpayer’s income does not exceed UAH40 million (USD1,367,292), the taxpayer may opt not to make any adjust ments to the financial result before tax for CPT purposes.
Depreciation. For purposes of tax depreciation, fixed assets are defined as assets that are designated for use in a taxpayer’s business activity for more than one year and that have a value exceed ing UAH20,000 (approximately USD684). The Tax Code provides for 16 groups of tangible fixed assets, 6 groups of nontangible fixed assets and 5 methods of tax depreciation. Similar to financial accounting, tax depreciation is accrued per each item.
list of depreciation methods is in line with methods stipu lated for financial accounting.
following are the methods:
Straight-line
Declining-balance
Accelerated declining-balance
Sum-of-the-years’ digits
Unit-of-production
of an asset is accrued on a monthly basis through out the useful life cycle of the asset. Depreciation is not accrued for the period of non-use of fixed assets in a business activity as a result of their conservation. The following table shows the minimum allowable term of the useful lives of assets.
Minimum term of useful life Group Assets Years
Capital expenditure on land
not related to
Buildings
Facilities
devices
Machinery and equipment
and computer equipment
Transport facilities
appliances and equipment
Animals
plants
Other fixed assets
Temporary facilities
containers
Rental objects
biological assets
of Group 1 (land plots) and Group 13 (natural resources), as well as goodwill and non-production fixed assets and intan gibles, are not subject to depreciation.
minimum term of useful life is not determined for the assets of Group 10 (library holdings) and Group 11 (tangible assets of small value).
Taxpayers should use the longer of the tax accounting or finan cial accounting depreciation terms. Accelerated depreciation is allowed in accordance with the following rules:
Starting 1 January 2017, taxpayers are allowed to depreciate under a straight-line method qualifying fixed assets of Group
over a minimal two-year period if these assets were purchased after 1 January 2017 and put into operations before 31 December 2019. The right to use this tax incentive may be transferred upon reorganization.
• From 1 January 2020 to 31 December 2030, taxpayers may use accelerated depreciation for new machinery and equipment (Group 4) and vehicles (Group 5) within a two-year useful life and for transmission devices (Group 3) and other fixed assets (Group 9) within a five-year useful life, subject to qualifying conditions.
Relief for losses. In general, the Tax Code allows the unlimited carryforward of losses, subject to special rules for the large tax payers as outlined below. Transferability of tax losses through corporate reorganizations is subject to recently introduced spe cial rules and is limited.
Starting from 2022, the right of large taxpayers to carry forward tax losses is limited; the losses of previous periods can be carried forward until fully utilized, but only up to 50% of the unutilized amount can be deducted in a reporting period. As an exception, if the tax losses are up to 10% of taxable profit of the current period, such losses can be deducted in full.
The law does not allow tax losses to be carried back (that is, off setting the tax loss of the current year against the taxable profit of previous years to reduce tax payments). However, for taxpay ers that determine tax payable based on quarterly tax returns, the carryback of a tax loss within a year may be technically possible because tax returns are completed cumulatively.
Groups of companies. The Ukrainian tax law does not provide for the grouping of different legal entities.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax (VAT)
Standard rate 20
Supply and import of certain types of agricultural products
Import and supply of pharmaceuticals, and provision of certain types of cultural and temporary accommodation services (exemptions apply)
Services for domestic transportation of passengers and luggage by air until 2024
Exports of goods and certain services
Excise tax Various Customs duties
Environmental tax Various Rent tax
Property tax Various
E. Miscellaneous matters
Foreign-exchange controls. The Ukrainian currency is the hryvnia (UAH). The official exchange rate of the hryvnia against the US dollar can be found at the National Bank of Ukraine (NBU)
website (www.bank.gov.ua); the retail exchange rate may differ from the official exchange rate. Ukraine has rather strict currency control rules, but they are gradually being softened. A wide vari ety of controls are imposed with respect to the use, circulation and transfer of foreign currency within Ukraine and abroad. These controls, which affect almost all international business transactions, include the following:
• In general, transactions between Ukrainian residents and cash settlements within Ukraine may not be carried out in foreign currency.
• All statutory accounting and tax reporting, as well as tax pay ments, must be in Ukrainian currency.
• Wages and salaries paid to Ukrainian citizens must be in Ukrainian currency.
• Legal basis or obligation to perform a transaction in foreign currency that is confirmed by appropriate documents is required for the purchase of foreign currency.
• The deadline for settlements on export and import transactions is 365 days, subject to exceptions.
• There are e-limits, which are annual cap amounts for the remittance of foreign currency outside Ukraine, including the placement of own funds in foreign bank accounts and foreign investment. The limits are EUR2 million for legal entities and EUR200,000 for individuals. These e-limits are slightly modified equivalents of the previously effective individual licensing by the National Bank of Ukraine. There are exhaustive lists of transactions not falling under the limits.
• Declared (publicly announced) simplification of currency con trol over low-value transactions (up to UAH400,000) does not work because banks are required to verify that there is no artificial splitting of the transactions.
• Exporters’ transactions using the letter of credit form of pay ment are subject to simplified currency control.
• Rules for transactions related to capital movement are compli cated.
Special currency-control restrictions apply during the period of martial law in Ukraine (see Section G for more details).
Debt-to-equity ratios and other restrictions on the deductibility of interest. If a taxpayer’s debt to nonresidents exceeds its equity by at least 3.5 times, interest accrued to nonresident parties by such taxpayer may be deductible in an amount of up to 30% of the sum of its CPT base, financial expenses and tax depreciation for the reporting year. Tax losses carried forward from prior periods are not taken into account for the calculation of the CPT base in this case.
The remaining interest, annually reduced by 5%, may be carried forward indefinitely, subject to the same limitation.
Special rules apply to capitalized interest. The limitation does not apply to interest accrued in favor of international financial orga nizations (subject to certain conditions), to foreign banks or to financial companies engaged exclusively in leasing activities.
Transfer pricing. Transfer pricing (TP) rules have been effective in Ukraine since 2013. Ukrainian TP regulations are frequently changed.
Under the current TP rules, controlled transactions include the following:
• Transactions with nonresident related parties.
• Transactions with nonresidents registered in low-tax and nontransparent jurisdictions. The government approves the list of such jurisdictions.
• Commission sales of goods and services through nonresident commissioners.
• Transactions involving goods and services between related parties through unrelated intermediaries that do not undertake significant functions, do not use significant assets and do not assume significant risks.
• Transactions with nonresidents that do not pay corporate profit tax, or are exempt from this tax and/or are not tax residents of the country where they are registered as legal entities. The gov ernment approves the list of legal forms of such nonresidents of such countries.
• Transactions between a nonresident and its PE in Ukraine.
• Transfer of functions, together with assets, risks and benefits to a related party, if the transfer results in a decrease of a taxpay er’s income and/or financial result, regardless of whether the transaction is recorded in accounting.
The abovementioned transactions are controlled if both of the following circumstances exist (for transactions between a non resident and its PE only the second circumstance needs to exist):
• The annual income of the taxpayer exceeds UAH150 million (approximately USD5,127,000).
• The amount of such annual transactions with each entity determined in line with the arm’s-length principle exceeds UAH10 million (ap proximately USD342,000).
The Tax Code provides for the following five methods for determining the arm’s-length price for controlled transactions:
• Compared uncontrolled price (the preferred method)
• Resale price
• Cost-plus
• Transactional net margin
• Profit-split
Specific profit-level indicators are assigned to each TP method.
Special rules apply to exports or imports of quoted goods.
Taxpayers that perform controlled transactions must file a TP Report (report on controlled transactions) and a notification on participation in a multinational group of companies by 1 October of the year following the reporting year. TP documentation must be submitted within 30 calendar days after the date of receipt of the request. The statute of limitations for TP purposes is cur rently seven years.
Starting from the 2021 reporting year, three-tiered TP reporting applies to qualifying cases. This reporting consists of a Master File, TP documentation (a Local File) and a country-by-country report.
Controlled foreign companies. Controlled foreign company (CFC) rules have been introduced in Ukraine. The rules relate to resi dents of Ukraine (both individuals and legal entities) that control
companies registered outside of Ukraine, including trusts and funds. The rules introduce mandatory reporting in Ukraine and aim to tax profits of foreign companies at the level of Ukrainian controllers unless an exemption applies.
The CFC’s profit should be included in the tax base of Ukrainian controllers regardless of whether such profit is paid to these controllers. This profit can be taxable at 18%, and for dividends received by CFCs (directly or indirectly) from Ukrainian companies that are CPT payers or non-CPT payers, the rates are 5% and 9%, respectively.
There are special rules for calculation of a CFC’s taxable profit and the cases when the CFC’s profit is not included into its controller’s income. These rules depend on the effective profit tax rate, the portion of passive income in the CFC`s total income, adequate business substance at the CFC and a double tax treaty between Ukraine and the respective country. The total aggregate income of all CFCs of one controller from all sources not exceeding EUR2 million for the reporting period is exempt from taxation in Ukraine.
Controllers are required to report their control over shares in CFCs and the CFCs’ taxable profit. The first reporting period is 2022. The Tax Code allows the submission of the first report in 2024 for the first two reporting periods (2022 and 2023).
Diia City Regime. A new preferential tax regime for the IT indus try, known as the Diia City Regime, was introduced in Ukraine and became operational in February 2022.
The Diia City Regime allows companies to do the following:
• To keep paying 18% CPT under general rules
• To pay CPT under special rules, which are very similar to the rules of exit capital tax (ECT), at a 9% rate on specific transac tions and at 18% rate on controlled transactions.
A taxable object for the ECT is an exhaustive list of transactions that involve monetary or in-kind payments in favor of persons who are not residents of Diia City. Such transactions include, among others, the following:
• Distribution of dividends
• Payment of royalties in excess of 4% of net operating income for the previous year
• Payment on withdrawal of the owner of corporate rights from the participants, liquidation and repurchase of own corporate rights, in excess of the amount of investment
• Payment of interest, commissions, other rewards
• Free-of-charge provision of property, works, services or their sale without receipt of payment within 365 days and provision of financial aid that is not subject to repayment within 12 cal endar months
• Purchase of property, works, services on a prepayment basis if the delivery period exceeds 365 days from the date of payment
• Investments in objects located outside of Ukraine
• Contributions to the authorized capital, joint ventures or trust management
• Transfer of funds to own accounts in foreign banks
• Business transactions that are recognized as controlled accord ing to Article 39 of the Tax Code if their conditions do not comply with the arm’s-length principle
• Other qualifying transactions and payments, including those in favor of nonresidents
If payments for the transactions subject to ECT are made in-kind, the tax base is determined at a value not lower than the arm’slength level.
The basic tax reporting period for ECT filing is a calendar year. Attractive personal income taxation rules apply under the Diia City Regime.
To join the Diia City Regime, a legal entity should be incorpo rated under the laws of Ukraine and meet the established eligibil ity criteria.
The Diia City Regime is supposed to be in place for 25 years.
F. Treaty withholding tax rates
Ukraine honors the double tax treaties of the former USSR, ex cept for treaties that have been superseded by new treaties con cluded directly by Ukraine or renounced by the other party to the treaty. Ukraine is not a member of the Organsiation for Economic Co-operation and Development (OECD). As a result, the Ukrainian tax authorities are not formally bound by the commentary of the OECD model convention; however, Ukrainian tax authorities and Ukrainian courts often rely on OECD commen tary. The rates in the table below reflect the treaty rates for divi dends, interest and royalties paid from Ukraine to residents of treaty jurisdictions. Exceptions or conditions may apply, depend ing on the terms of the particular treaty.
Beneficial ownership and tax residency tests, as well as addi tional eligibility conditions, must be met to apply reduced with holding tax rates under the double tax treaties. The national law details the “beneficial owner” condition and provides for the “principal purpose test” and “look through” concept.
Ukraine has ratified the Multilateral Instrument (MLI) and de posited its final positions with the OECD. On 1 December 2019, the MLI entered into force for Ukraine. The impact of the MLI on the text of Ukrainian treaties (including the date of its entry into effect for a particular treaty) should be analyzed on a caseby-case basis.
Dividends Interest Royalties % % %
Algeria 5/15 (d) 0/10 (e) 10 Armenia 5/15 (d) 0/10 (e) 0
Austria 5/15 (d) 0/5 (p) 0/5 (k)(o)
Azerbaijan 10 0/10 (e) 10
Belarus 15 10 15
Belgium 5/15 (d) 0/2/10 (h)(aa) 0/10 (k)(aa)
Brazil 10/15 (d)(ee) 0/15 (ff) 15
Bulgaria 5/15 (d) 0/10 (e) 10 Canada 5/15 (d)(pp) 0/10 (e)(nn) 0/10 (f) China Mainland (bb) 5/10 (d) 0/10 (e) 10
Croatia
Dividends Interest Royalties % % %
5/10 (d) 0/10 (e) 10
Cyprus 5/10 (xx) 0/5 (e) 5/10 (yy)
Czech Republic
5/15 (d) 0/5 (e) 10
Denmark 5/15 (d) 0/10 (e)(oo) 0/10 (g)
Egypt 12 0/12 (e) 12
Estonia 5/15 (d) 0/10 (e) 10
Finland 0/5/15 (m) 0/5/10 (n) 0/5/10 (l)
France 0/5/15 (a) 0/2/10 (j) 0/10 (r)
Georgia 5/10 (d) 0/10 (e) 10
Germany 5/10 (d) 0/2/5 (h) 0/5 (k)
Greece 5/10 (d) 0/10 (e) 10
Hungary 5/15 (d) 0/10 (e) 5
Iceland 5/15 (d) 0/10 (jj) 10
India 10/15 (d) 0/10 (e) 10
Indonesia 10/15 (d)(qq) 0/10 (e) 10
Iran 10 0/10 (e) 10
Ireland 5/15 (d) 0/5/10 (aaa) 5/10 (yy)
Israel 5/10/15 (d)(z) 0/5/10 (dd) 10
Italy 5/15 (d) 0/10 (e) 7
Japan 15 0/10 (e) 0/10 (ww)
Jordan 10/15 (d)(ii) 0/10 (hh)(ii) 10 (ii)
Kazakhstan 5/15 (d)(pp) 0/10 (e) 10
Korea (South) 5/15 (d) 0/5 (e) 5
Kuwait 0/5 (cc) 0 10
Kyrgyzstan 5/15 (d) 0/10 (e) 10
Latvia 5/15 (d) 0/10 (e) 10
Lebanon 5/15 (d) 0/10 (e) 10
Libya 5/15 (d) 10 10 Lithuania 5/15 (d) 0/10 (e) 10 Luxembourg 5/15 (d) 0/5/10 (ccc) 5/10 (ddd)
Malaysia 5/15 (d) 0/10 (e) 8
Malta 5/15 (d) 0/10 (e) 10
Mexico 5/15 (d) 0/10 (zz) 10
Moldova 5/15 (d) 0/10 (e) 10 Mongolia 10 0/10 (rr) 10 Morocco 10 (ee) 0/10 (e) 10
Netherlands 0/5/15 (i) 0/5 (e)(rr) 5/10 (gg)
North Macedonia 5/15 (d) 0/10 (e) 10
Norway 5/15 (d) 0/10 (e)(kk) 5/10 (x)
Pakistan 10/15 (tt) 0/10 (uu) 10
Poland 5/15 (d) 0/10 (e) 10
Portugal 10/15 (q) 0/10 (e)(ll) 10
Qatar 0/5/10 (eee) 0/5/10 (fff) 5/10 (yy)
Romania 10/15 (d) 0/10 (e) 10/15 (s)
Saudi Arabia 5/15 (d) 10 10
Singapore 0/5/15 (ss) 0/10 (e) 7.5
Slovak Republic 10 10 10
Slovenia 5/15 (d) 5 5/10 (gg)
South Africa 5/15 (d) 0/10 (e)(ll) 10
Spain 15 0 0/5 (b)
Sweden 0/5/10 (d)(t) 0/10 (u) 0/10 (v)
Switzerland 0/5/15 (y) 0/5 (p) 5
Syria 10 0/10 (e) 15
Tajikistan 10 0/10 (e) 10
Thailand 10/15 (d) 0/10/15 (w) 15
Turkey