Cyprus and Ukraine have agreed upon the text of the double tax agreement that will replace the current one. The new Convention for the avoidance of double taxation will most likely enter into force no sooner than January 2019 when the existing agreement expires. The double tax treaty between the two countries offers various tax benefits for foreign investors from Ukraine in Cyprus and vice versa.
A new double tax treaty
Cyprus and Ukraine have an existing Convention for the avoidance of double taxation in place, however, it will expire and the two countries have agreed upon renewing it, with additional provisions.
The current Convention was entered into force on January 1, 2014 and it was used to replace the first agreement of this type, signed in 1982. According to the first information released about the new double tax agreement, it will include a special clause for taxes on interest, dividends, royalties and capital gains. According to this most favored nation clause, Cyprus will benefit from equal tax treatment from Ukraine, should the country extend its favorable taxation terms with other countries.
The provisions of the double tax treaty between Cyprus and Ukraine
The double tax treaty between Cyprus and Ukraine covers all income taxes imposed on companies and individuals, including income from movable and immovable property. The taxes applicable for Cyprus include:
- the income tax;
- the special contribution for the defense of the Republic;
- the capital gains tax;
The taxes covered in case of Ukraine include the tax on company profits and the individual income tax. The Convention also applies in case of any taxes levied in place of or similar to the ones mentioned above, introduced after the signature date of the agreement.
According to the double tax agreement, the two countries impose a withholding tax rate on dividends
of 5% if the company receiving the dividends holds at least 20% of the capital of the company that makes the payment or if it has invested in shares in that company (at least 10,000 euros). The withholding tax rate on interest is limited to 2% under the Convention.