Ukraine has signed numerous Double Taxation Treaties (DTT) with countries in Europe and all over the World. This promotes good business and contributes to the overall growth of the economy. This text will discuss some of the articles incorporated under the Ukrainian double taxation agreements.
What is a Double Taxation Treaty
A Double Taxation Treaty (DTT), also called a Double Taxation Agreement (DTA) is a bilateral accord that's signed between two countries, clarifying their taxing rights on all forms of income. The DTT minimizes chances of double taxation that can arise from cross-border business activities. In most cases, the treaties will come with provisions for the exemption or reduction of tax on some of the incomes generated e.g. royalties and interest. In addition to avoidance of double taxation, DTTs prevent tax evasion on taxable income and capital.
Some of the countries that signed DTTs with Ukraine are:
Algeria Estonia, South Africa, Mongolia, Finland, Armenia, Kazakhstan, Spain, Montenegro, Korea, France, Morocco, Austria, Sweden, Azerbaijan, Germany, Georgia, Switzerland, Netherlands, Kuwait, Belarus, Netherlands, Kyrgyzstan, Syria, Norway, Greece, Belgium, Latvia, Lebanon, Poland, Brazil, Hungary, Tajikistan, Pakistan, Thailand, Portugal, Turkey, Bulgaria, Libya, Iceland, India, Romania, Canada, United Kingdom, Ireland, Italy, Denmark, United States of America, etc.
Definition of terms
The term "Ukraine" used in the conventions describes the geographical territory of Ukraine. In addition, it represents its exclusive economic zone and any region designated to it in accordance with the international law.
Person - refers to a company, body of persons or an individual. It could have different meanings depending on the specific agreement being signed.
Company - is used in reference to any entity or corporate body for the purpose of taxing.
National - is a term that's used on an individual who possesses a citizenship/ nationality from one of the Contracting States. It can also be used on a legal person, association or partnership.
The conventions apply to individuals who are deemed as residents of either one or both of the involved states.
The Covered Taxes
They apply to taxes on capital, and income and on elements of capital and income on gains from immovable or movable assets as well as capital appreciation. This is done on behalf of each of the signatory countries, regardless of the way the taxes are levied.
In the conventions, the term "resident" is used for any individual who is liable for taxation by reason of his management place, residence, domicile or place of incorporation under the Contracting State laws. However, this term doesn't refer to an individual who is liable to tax with regard to income only. If the person is a resident of both Ukraine and the Contracting State, their status shall be as follows:
- They shall assume the residency of the country which they have a permanent home;
- If they have permanent homes in both the contracting states, they will be a resident of the country with their "centre of vital interests".
- If it's impossible to determine which State has their best economic and personal interests, and if they do not have a permanent place of residence in either countries, then they can become a resident of the state where they have a citizenship.
If a company is a resident of both Ukraine and the Contracting State, its status will be determined in the following manner:
- It will be deemed as a resident of only the country which it is considered a national;
- In the event that it's not a national of either countries, it will be regarded as a resident of the country where its effective management is placed;
A person who isn't a company or an individual will be considered a resident of both Ukraine and the Contracting State. A mutual agreement would have to be reached by the competent authorities of both the Contracting States. This agreement will determine how that person will fit in the Convention. If no agreement is reached, the person will be neither a resident of Ukraine or the Contracting State and will not enjoy the benefits stated under the DTT.
Permanent establishment is a fixed place where a person carries their business activities. The term "permanent establishment" can be used for a factory, branch, office, workshop, warehouse, sales outlet, or place of management.
Plenty of articles are under the Ukrainian Double Tax Treaties have been established. They describe the tax regulations on dividends, immovable property incomes, business profits, associated enterprises, interest, royalties, capital gains, pensions and annuities, etc. This improves transparency and enables business between the two countries to flourish.