DOUBLE TAX TREATY BETWEEN CYPRUS AND UKRAINE

The new Treaty regarding the Double Tax Treaty (`DTT`) between Cyprus and Ukraine has been signed in November 2012. After its ratification by the Ukraine Parliament the new Treaty will come into force on the 1st of January 2014 and will replace the corresponding Treaty that was signed in 1982 between Cyprus and the USSR.

THE MOST IMPORTANT PROVISIONS OF THE NEW TREATY ARE THE FOLLOWING:

The new Treaty introduces withholding tax:

· Dividend Income:

In relation to dividend income withholding tax will be 5%

· Capital Gains:

In regard to all capital gains withholding tax will be 2%.

· Royalty Income:

In regard to royalty income withholding tax will be 5% on royalties resulting from the use of any copyrights, commercial or scientific experience, trade mark, patent, secret formula, process or information concerning industrial. In relation to royalties on software and any other form of intangibles the tax rate will be 10%.

· Capital Gains Tax:

The taxing rights of capital gains tax resulting from the profits of the shareholders that are being held by people who have Cyprus as tax residency, is consider to be Cyprus exclusive right.

CONCLUSION:

As a result Cyprus will continue to be the preferred destination regarding international investments in Ukraine, since the new Treaty simplifies and resets the uncertainty that existed in relation to the previous Treaty and also promotes, modernises and strengthens investors’ relations between the two countries.