Cyprus to Replace Double Tax Treaty with Ukraine

After signing a new double tax treaty several years back, Cyprus and Ukraine have agreed upon a new clause to be entered in the agreement. This new clause would help both countries to enhance economic relations and would provide more advantageous conditions for Ukrainian and Cypriot companies doing business in the two states. Our Cypriot lawyers can provide you with detailed information about trading relations with Ukraine.

Cyprus includes most favored nation clause in the double tax treaty with Ukraine

Cyprus has amended its double taxation agreement with Ukraine in 2012, convention that was enforced in 2014 by both countries. Nevertheless, in the ever changing international context of taxation, when all countries seek to improve the conditions offered to partner states, Cyprus is no exception. This is also why it started to add new protocols to its double taxation agreements. At the end of 2015, Cyprus added a new clause to its treaty for the avoidance of double taxation with Ukraine: the most favored nation clause (MFN) which will cover interest, dividend, royalties and capital gains taxes. The protocol will ensure Cypriot companies will benefit from equal treatment if Ukraine agrees to other favorable terms with other countries. The new clause will be enforced beginning with January 1st, 2019.

What does the new Cyprus-Ukraine double tax treaty provide for?

The current double taxation agreement Cyprus has concluded with Ukraine will expire in 2019 and provides for reduced rates for dividend and interest payments and for the taxation of capital gains. A reduced rate of 15% will be provided to Ukrainian companies with Cypriot shareholders, but a reduced rate of 5% is also available if the shareholders hold more than 20% in the paying company and if the minimum amount invested is 100,000 euros.

Interest payments benefit from a 5% reduced tax rate, while the taxation of capital gains from movable property will be taxed in the country of the company disposing of the respective property. However, starting with 2019, disposing companies will also be taxed in the country the property is located in and will be granted a credit in their resident country against the paid tax.

Considering the changes in the new treaty will not be enforced until 2019, we invite you to contact our lawyers in Cyprus for information about the current agreement with Ukraine.