A Protocol amending the Cyprus-Ukraine Treaty for the Avoidance of Double Taxation has been signed on December 11, 2015 in Kiev.
The agreed protocol is expected to come into effect not earlier than the January 1st 2019, which is when the existing Convention will expire. The existing Convention was signed on November 8th, 2012 and entered into force on January 1st, 2014.
Even though the full text of the concluded Protocol is not available publically yet, based on announcements of the Ukrainian Ministry of Finance, the amendments will mostly concern the following:
Exemption from Ukrainian taxation will relate only to income earned by a resident of Cyprus from the alienation of shares or other corporate rights, more than 50% of which are directly or indirectly connected with immovable property situated in Ukraine (currently the only requirement for exemption of proceeds from the sale of property of residents of Cyprus is the location of the property in Ukraine)
An obligatory condition that needs to be fulfilled in order to ensure the application of 5% tax on dividend payments (in addition to the requirement of 20% ownership of the company) is to invest at least EUR 100,000 as share capital of the Ukrainian company (currently in order to be entitled to a 5% tax only one of these conditions must be fulfilled).
A 5% tax rate on interest payments (currently set at 2%).
Following ratifications by Ukraine and the Republic of Cyprus, the new amending Protocol will come into force on or after January 1, 2019.
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