Tax rate revision of Passive Income between Ukraine and Cyprus

Ukraine/July 2015

On 22nd of March 2013, the Cyprus government has ratified the new Double Tax Treaty between Cyprus and Ukraine, whereas the Ukrainian Parliament has proceeded with the ratification on 4th of July 2013.

The new treaty was put into effect as from 19th of August 2013.

On 2nd of July 2015, the Ukrainian Ministry of Finance together with officials from the Republic of Cyprus agreed on an increase in the tax rate on certain passive incomes.

The most important changes in DTT with Cyprus will be the increase of the tax rate on passive income received in the signatory country.

The new revised DTT includes the following:

-In Ukraine, income is not taxed where Cyprus residents receive from the disposal of stock and other corporative rights, more than 50% of costs which are connected directly or mediated with estate or property located in Ukraine.

-An obligatory condition for the application of a 5% withholding tax on dividends paid, except where a 20% share of ownership in a company has invested at least €100.000 to the nominal Share Capital of the Ukrainian company.

-An agreement on a 5% tax rate for the payment of interest.

The new Passive Income is expected to come into force not earlier than 1 January 2019, as stated in Article 27 of the current DTT.

Nadiya Omelchuk
Eurofast Global, Kyiv office