Corporate tax in Ukraine

Summary  
Corporate Income Tax Rate (%) 18 (a)
Capital Gains Tax Rate (%) 18
Branch Tax Rate (%) 18
Withholding Tax (%)
Dividends
15
Interest 15 (b)
Royalties 15
Freight 6

 

Advertising 20 (c)
Income from Discount Bonds 18 (d)
Insurance 0/4/12 (c)(e)
Other Ukrainian-Source Income 15
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0
Carryforward Unlimited (f)

a) Special tax rates exist for insurance companies.

b) The following interest is exempt from withholding tax:

  • Interest and income (discounts) received by nonresidents from state securi­ties, municipal bonds or debt securities if these instruments are secured by state or municipal guarantees and if they are sold or placed by nonresidents outside Ukraine through nonresident authorized agents
  • Interest payments to nonresidents on loans received by the state or to a municipal budget if they are reflected in the state or municipal budget or in the budget of the National Bank of Ukraine
  • Interest on loans obtained by business entities if fulfillment of these loans is secured by state or municipal guarantees

c) In essence, the tax on advertising services and insurance payments is not a withholding tax, because the tax applicable to fees paid to nonresidents for advertising services and the tax on insurance payments is not withheld from the payments remitted to the nonresident recipient, but is paid at the expense of the Ukrainian company making the payments (that is, the economic burden of paying the tax is borne by the Ukrainian party).

d) The tax base is calculated as the difference between the nominal value of the discount bonds and the acquisition value (purchase price) of the bonds on the primary or secondary stock market. Exemptions apply (see footnote [b] above).

e) The 0% rate applies to the following:

  • Insurance and reinsurance payments to financially reliable nonresidents
  • Insurance payments with respect to civil aviation passenger transportation
  • Insurance payments to nonresident individuals under mandatory insurance agreements
  • Insurance payments under Green Card insurance agreements (mandatory third-party liability insurance for car owners of states participating in the Green Card system)

The 4% rate applies to insurance payments to nonresidents under insurance agreements covering risks outside Ukraine (subject to exceptions). The stan­dard 12% rate applies in all other cases.

(f)   Exceptions apply (see Section C).

Taxes on corporate income and gains

Corporate profit tax. Ukrainian legal entities (except for non­profit organizations) are subject to corporate profit tax (CPT) on their worldwide income and gains. Foreign legal entities (except for organizations with diplomatic privileges or immunities) are subject to CPT if they receive Ukrainian-source income. CPT also applies to permanent establishments of nonresidents receiv­ing income from Ukrainian sources or performing agency ser­vices or certain other services for the benefit of nonresidents.

Rates of tax. The CPT rate is 18%.

Capital gains. Capital gains are included in the pretax financial result and generally taxed at the regular CPT rate.

Special tax rules apply to capital gains derived from trading in securities. Profits from trading in securities are included in tax­able profit. Losses from trading in securities can be carried for­ward indefinitely to offset future income from such trading.

Administration. Under the general rule, taxpayers must report CPT quarterly on a cumulative basis. Annual CPT reporting is available for the following taxpayers:

  • Newly incorporated companies
  • Agricultural producers
  • Companies with annual income, net of indirect taxes, of less than UAH20 million (approximately USD764,000)

Taxpayers that file only an annual return must submit it by within 60 days after the year-end. If a taxpayer files tax returns quarter­ly, both quarterly tax returns and the final annual tax return must be submitted within 40 days after the quarter or the year-end. Tax is payable within 10 days after the deadline for submitting the tax return.

Effective from 1 January 2016, CPT prepayments are abolished. However, in 2016, taxpayers must pay “transition” CPT prepay­ments until 31 December 2016, calculated as 2/9 of the CPT pay­able for the three quarters of 2016.

Dividends. A company distributing dividends to its shareholders must pay an 18% advance corporate profit tax (ACPT) on the positive difference between the amount of dividends and taxable profit for the reporting year for which dividends are paid, pro­vided that the tax liability for the year is settled (if unsettled, ACPT is levied on the whole amount of dividends). The tax is paid either before or at the moment of the dividend distribution. The ACPT is paid at the expense of the dividend payer and does not decrease the amount of dividends due to shareholders. In general, ACPT can be offset against the CPT liability of the taxpayer in the current period.

Exemption from ACPT on dividends applies to the following dividends:

  • Dividends paid to individuals
  • Dividends paid by joint investment vehicles
  • Dividends paid to shareholders of the taxpayer’s parent com­pany, up to the amount of dividends received by the parent company from third companies
  • Dividends paid to companies whose profits are exempt from tax, up to the amount of such exempt profits in the period for which dividends are paid

Dividends distributed to nonresidents are subject to withholding tax at a rate of 15%, unless an applicable double tax treaty pro­vides otherwise.

Ukrainian CPT payers do not include dividends received from other Ukrainian CPT taxpayers that pay ACPT in their taxable profit.

Foreign tax relief. Ukrainian enterprises may credit foreign tax paid with respect to foreign-source profits against Ukrainian tax imposed on the same income, up to the amount of such Ukrainian tax. The credit is granted only if the taxpayer submits a written confirmation from the tax authorities of the foreign country that certifies payment of the foreign tax.

Determination of taxable profit

General. Taxable profit is defined as the financial result before tax, determined under Ukrainian accounting standards or under

International Financial Reporting Standards, subject to several ad justments. Add-back adjustments increasing the financial re­sult for tax purposes include the following:

  • Thirty percent of the cost of goods, fixed assets, works and services purchased from nonresidents registered in low-tax and non-transparent jurisdictions, or from nonprofit organizations if the amount of purchase from nonprofit organizations exceeds 50 minimum salaries (approximately USD2,600). This limita­tion does not apply if the taxpayer substantiates the arm’s-length level of the expenses by preparing transfer-pricing docu­mentation.
  • Royalties paid to nonresidents exceeding the sum of royalty income and 4% of the taxpayer’s net sales income for the pre­ceding reporting year (excluding value-added tax [VAT] and excise tax). In some cases, royalties are added back in full. The limitation does not apply if the taxpayer substantiates the arm’s-length level of the royalties by preparing transfer-pricing docu­mentation.
  • Transfer-pricing adjustments.
  • Provisions and allowances accrued for financial accounting purposes (except salary provisions).
  • Bad-debt allowances.
  • Funds or cost of goods, works or services provided to nonprofit organizations in an amount exceeding 4% of taxpayer’s taxable profit for the preceding year.
  • Impairment of fixed assets and intangible assets.
  • Losses from participation in the equity of other companies.

Industry-specific adjustments apply for banks and financial insti­tutions.

Tax-loss carryforwards decrease the pretax financial result for CPT purposes.

If a taxpayer’s income does not exceed UAH20 million (USD760,000), the taxpayer may opt not to make any adjust­ments to the financial result before tax for CPT purposes.

Depreciation. For purposes of tax depreciation, fixed assets are defined as assets that are designated for use in a taxpayer’s busi­ness activity for more than one year and that have a value exceed­ing UAH6,000 (approximately USD230). The Tax Code pro vides for 16 groups of tangible fixed assets, 6 groups of non-tangible fixed assets and 5 methods of tax depreciation. Similar to finan­cial accounting, tax depreciation is accrued per each item.

The list of depreciation methods is in line with methods stipu­lated for financial accounting, except for the unit-of-production method, which may not be used. The following are the methods:

  • Straight-line
  • Declining-balance
  • Accelerated declining-balance
  • Sum-of-the-years’ digits

Depreciation of an asset is accrued on a monthly basis through­out the useful life cycle of the asset. The following table shows the minimum allowable term of the useful lives of assets.

Group Assets Minimum term
of useful life
Years
2 Capital expenditure on land improvements, not related to  
  construction 15
3 Buildings 20
  Facilities 15
  Transmission devices 10
4 Machinery and equipment 5
  Electronic and computer equipment 2
5 Transport facilities 5
6 Tools, appliances and equipment  
  (furniture) 4
7 Animals 6
8 Perennial plants 10
9 Other fixed assets 12
12 Temporary facilities 5
14 Returnable containers 6
15 Rental objects 5
16 Long-term biological assets 7

Assets of Group 1 (land plots) and Group 13 (natural resources) are not subject to depreciation.

The minimum term of useful life is not determined for the assets of Group 10 (library holdings) and Group 11 (tangible assets of small value).

Taxpayers should use the longer of the tax accounting or finan­cial accounting depreciation terms.

Relief for losses. In general, the Tax Code allows the unlimited carryforward of losses. However, it is advisable to monitor fur­ther developments in the tax laws as ad hoc restrictions and ad­verse interpretations of the law are possible.

The law does not allow tax losses to be carried back (that is, off­setting the tax loss of the current year against the taxable profit of previous years to reduce tax payments). However, for taxpay­ers that determine tax payable based on quarterly tax returns, the carryback of a tax loss within a year may be technically possible because tax returns are completed cumulatively.

Groups of companies. The Ukrainian tax law does not provide for the grouping of different legal entities.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax (VAT)
Standard rate 20
Import and supply of pharmaceuticals (exemptions apply) 7
Exports of goods and certain services 0
Excise tax Various
Customs duties Various
Environmental tax Various
Rent tax Various
Property tax Various

Miscellaneous matters

Foreign-exchange controls. The Ukrainian currency is the hryvnia (UAH). The official exchange rate of the hryvnia against the US dollar can be found at the National Bank of Ukraine (NBU) web site (www.bank.gov.ua); the retail exchange rate may differ from the official exchange rate. A wide variety of controls are imposed with respect to the use, circulation and transfer of foreign currency within Ukraine and abroad. These controls, which affect almost all international business transactions, include the following:

  • In general, transactions between Ukrainian residents and cash settlements within Ukraine may not be carried out in foreign currency.
  • All statutory accounting and tax reporting, as well as tax pay­ments, must be in Ukrainian currency.
  • Wages and salaries paid to Ukrainian citizens must be in Ukrainian currency.
  • Ukrainian currency may be used to purchase foreign currency.
  • Ukrainian enterprises must obtain an individual license (permis­sion) from the NBU to engage in certain business transactions, including the opening of bank accounts abroad and investing abroad.
  • Ukrainian enterprises must collect their foreign currency pro­ceeds for goods, works or services supplied by them within 90 days from the date of exportation or supply of services. Similarly, foreign currency prepayments for goods, works or services must not exceed 90 days.
  • Seventy-five percent of Ukrainian residents’ foreign currency proceeds are subject to mandatory sale on the Ukrainian inter­bank currency market. The NBU sets the percentage of manda­tory sale on an ad hoc basis and, as a result, the percentage could change.
  • Payments for services rendered by nonresidents, as well as cross-border lease and royalty payments, are subject to price-evaluation review if the total amount of the contract (or the total annual amount payable under several contracts for similar services between the same parties) exceeds EUR50,000 (or its equivalent in another foreign currency). The governmental informational-analytical center for monitoring foreign commodities markets conducts the price-evaluation reviews.
  • Several temporary restrictions are imposed on cross-border pay­ments in foreign currency.

Debt-to-equity ratios and other restrictions on the deductibility of interest. If a taxpayer’s debt to a nonresident related party is at least 3.5 times (10 times for financial and leasing companies) the amount of its equity, interest payable by such taxpayer may be deductible in an amount of up to 50% of the sum of its financial result before taxation, financial expenses and financial account­ing depreciation for the reporting year. The remaining interest, annually reduced by 5%, may be carried forward indefinitely, subject to the same limitation.

Transfer pricing. Effective from 1 January 2015, new transfer-pricing rules took effect in Ukraine. Additional changes were made in mid-2015.

Under the transfer-pricing rules, controlled transactions include the following:

  • Transactions with nonresident related parties.
  • Transactions with nonresidents registered in low-tax jurisdic­tions and jurisdictions with which Ukraine has not entered into treaties on exchange of information. The government approves the list of such jurisdictions.
  • Commission sales through nonresident commissioners.
  • Transactions between related parties through unrelated inter­mediaries that do not undertake significant functions, use sig­nificant assets or assume significant risk.

The above-mentioned transactions are controlled if both of the following circumstances exist:

  • The annual taxable profit of the taxpayer exceeds UAH50 mil­lion (approximately USD1,900,000).
  • The amount of such annual transactions with each entity ex­ceeds UAH5 million (approximately USD190,000).

The Tax Code provides for the following five methods for deter­mining the arm’s-length price for controlled transactions:

  • Compared uncontrolled price (the preferred method)
  • Resale-minus
  • Cost-plus
  • Transactional net margin
  • Profit-split

Special rules apply to exports or imports of quoted goods. These rules previously applied only to transactions with nonresidents registered in low-tax or non-transparent jurisdictions. However, they now apply to all export and import transactions involving quoted goods.

The following transactions are deemed to be at arm’s length:

  • Transactions with state-regulated prices
  • Transactions for which appraisal is mandatory
  • Transactions for which an auction (public bidding) is mandatory
  • Forced sales of collaterals

Taxpayers that perform controlled transactions must file a transfer-pricing report by 1 May of the year following the reporting year. Beginning on this date, the tax authorities may request transfer-pricing documentation for some or all of the controlled transac­tions. This documentation must be submitted within one month after the date of receipt of the request. The statute of limitations for transfer-pricing purposes is currently seven years.

Treaty withholding tax rates

Ukraine honors the double tax treaties of the former USSR, ex­cept for treaties that have been superseded by new treaties con­cluded directly by Ukraine or renounced by the other party to the treaty. Ukraine is not a member of the Organisation for Economic Co-operation and Development (OECD). As a result, the Ukrainian tax authorities are not bound by the commentary of the OECD model convention. The rates in the following table reflect the lower of the treaty rate and the rate under domestic tax law for dividends, interest and royalties paid from Ukraine to residents of treaty countries. Excep tions or conditions may apply, depending on the terms of the particular treaty.

 

     
  Dividends

%

Interest

%

Royalties

%

Algeria 5/15 (d) 0/10 (e) 10
Armenia 5/15 (d) 0/10 (e) 0
Austria 5/10 (d) 0/2/5 (h) 0/5 (k)
Azerbaijan 10 0/10 (e) 10
Belarus 15 10 15
Belgium 5/15 (d) 0/2/10 (h)(aa) 0/10 (k)(aa)
Brazil 10/15 (d)(ee) 0/15 (ff) 15
Bulgaria 5/15 (d) 0/10 (e) 10
Canada 5/15 (d)(pp) 0/10 (e)(nn) 0/10 (f)
China (bb) 5/10 (d) 0/10 (e) 10
Croatia 5/10 (d) 0/10 (e) 10
Cyprus 5/15 (xx) 0/2 (e) 5/10 (yy)
Czech Republic 5/15 (d) 0/5 (e) 10
Denmark 5/15 (d) 0/10 (e)(oo) 0/10 (g)
Egypt 12 0/12 (e) 12
Estonia 5/15 (d) 0/10 (e) 10
Finland 0/5/15 (m) 0/5/10 (n) 0/5/10 (l)
France 0/5/15 (a) 0/2/10 (j) 0/10 (r)
Georgia 5/10 (d) 0/10 (e) 10
Germany 5/10 (d) 0/2/5 (h) 0/5 (k)
Greece 5/10 (d) 0/10 (e) 10
Hungary 5/15 (d) 0/10 (e) 5
Iceland 5/15 (d) 0/10 (jj) 10
India 10/15 (d) 0/10 (e) 10
Indonesia 10/15 (d)(qq) 0/10 (e) 10
Iran 10 0/10 (e) 10
Ireland 5/15 (d) 0/5/10 (aaa) 5/10 (yy)
Israel 5/10/15 (d)(z) 0/5/10 (dd) 10
Italy 5/15 (d) 0/10 (e) 7
Japan 15 0/10 (e) 0/10 (ww)
Jordan 10/15 (d)(ii) 0/10 (hh)(ii) 10 (ii)
Kazakhstan 5/15 (d)(pp) 0/10 (e) 10
Korea (South) 5/15 (d) 0/5 (e) 5
Kuwait 0/5 (cc) 0 10
Kyrgyzstan 5/15 (d) 0/10 (e) 10
Latvia 5/15 (d) 0/10 (e) 10
Lebanon 5/15 (d) 0/10 (e) 10
Libya 5/15 (d) 10 10
Lithuania 5/15 (d) 0/10 (e) 10
Macedonia 5/15 (d) 0/10 (e) 10
Malaysia 15 0/15 (e) 10/15 (c)
Mexico 5/15 (d) 0/10 (zz) 10
Moldova 5/15 (d) 0/10 (e) 10
Mongolia 10 0/10 (rr) 10
Morocco 10 (ee) 0/10 (e) 10
Netherlands 0/5/15 (i) 0/2/10 (j) 0/10 (k)
Norway 5/15 (d) 0/10 (e)(kk) 5/10 (x)
Pakistan 10/15 (tt) 0/10 (uu) 10
Poland 5/15 (d) 0/10 (e) 10
Portugal 10/15 (q) 0/10 (e)(ll) 10
Romania 10/15 (d) 0/10 (e) 10/15 (s)
Russian      
Federation 5/15 (o) 0/10 (e) 10
Saudi Arabia 5/15 (d) 10 10
Singapore 0/5/15 (ss) 0/10 (e) 7.5

 

Slovak Republic 10 10 10
Slovenia 5/15 (d) 5 5/10 (gg)
South Africa 5/15 (d) 0/10 (e)(ll) 10
Spain 15 0 0/5 (b)
Sweden 0/5/10 (d)(t) 0/10 (u) 0/10 (v)
Switzerland 5/15 (d) 0/10 (p) 0/10 (k)
Syria 10 0/10 (e) 15
Tajikistan 10 0/10 (e) 10
Thailand 10/15 (d) 0/10/15 (w) 15
Turkey 10/15 (d) 0/10 (e) 10
Turkmenistan 10 0/10 (e) 10
United Arab      
Emirates 0/5/15 (y) 0/3 (e) 0/10 (k)
United Kingdom 5/10 (d)(mm) 0 0
United States 5/15 (d) 0 10
Uzbekistan 10 0/10 (e) 10
Vietnam 10 0/10 (e) 10
Yugoslavia (vv) 5/10 (d) 0/10 (e) 10
Non-treaty countries 15 0/15 (bbb) 15

(a)   The 0% rate applies to dividends paid to one or more companies that are the beneficial owners of these dividends and if either of the following conditions is satisfied:

  • The recipient company or companies hold directly or indirectly at least 50% of the capital of the company paying the dividends, and the total amount of their investments in the paying company is not less than 5 million French francs.
  • The investments of the recipient companies in the company paying the dividends are guaranteed or insured by the other state, the central bank of such state or a person acting on behalf of such state.

The 5% rate applies to dividends paid to companies that own at least 20% of the capital of a Ukrainian resident payer or 10% of the capital of a French resident payer. The 15% rate applies to other dividends.

b) The 0% rate applies to royalties paid for the use of, or the right to use, copy­rights for literary, dramatic, musical or artistic works. The higher rate applies to other royalties.

c) The 10% rate applies to the following:

  • Payments for the use of, or the right to use, patents, trademarks, designs or models, plans, secret formulas or processes
  • Payments for copyrights of scientific works; payments for the use of, or the right to use, industrial, commercial or scientific equipment
  • Payments for information concerning industrial, commercial or scientific experience

The 15% rate applies to payments for the use of, or the right to use, cinemat­ographic films, or tapes for radio or television broadcasting, and to payments for copyrights of literary or artistic works.

d) The lower rate applies to dividends paid to companies owning a minimum percentage of the capital of the payer (under the treaties, this percentage ranges from 10% to 50%). The higher rate applies to other dividends.

e) The 0% rate may apply to interest paid to or, in some cases, by government institutions of the contracting states. In some cases, the 0% rate also applies to the following:

  • Interest paid to entities authorized by government institutions
  • Interest on debt claims that are warranted, insured or directly or indirectly financed by the state or a financial institution wholly owned by the state Specific institutions are named in some treaties. The higher rate applies to other interest.

f) The 0% rate applies to payments for the use of, or the right to use, computer software. The 10% rate applies to other royalties.

g) The 0% rate applies to payments for the use of, or right to use, secret formu­las or processes, or for information (know-how) concerning industrial, com­mercial or scientific experience. The 10% rate applies to other royalties.

h) The 0% rate applies to interest paid to the state or an agency owned or con­trolled by the state and to interest paid to a resident of a contracting state with respect to a loan or other debt claim or credit granted, guaranteed or insured by public entities owned or controlled by the state. The 2% rate applies to interest on loans from banks or financial institutions and to interest with respect to sales on credit of merchandise or services between enterprises or sales of industrial, commercial or scientific equipment. The higher rate applies to other interest.

i) The 0% rate applies to dividends paid to companies (other than partnerships) that hold directly at least 50% of the capital of the payer of the dividends and have made an investment in the capital of the payer of at least USD300,000 or the equivalent in the currencies of the contracting states. The 0% rate also applies to dividends paid to companies whose investment in the capital of the payer is guaranteed or insured by government institutions or an agency or instrumentality owned or controlled by the government. The 5% rate applies to dividends paid to companies owning at least 20% of the payer. The 15% rate applies to other dividends.

j) The 0% rate applies to interest paid to the state or an agency owned or con­trolled by the state and to interest paid to a resident of a contracting state with respect to a loan or other debt claim or credit granted, guaranteed or insured by public entities owned or controlled by the state. The 2% rate applies to the following:

  • Interest paid on loans granted by banks or other financial institutions of the other state, including investment banks, savings banks and insurance com­panies
  • Interest paid with respect to the sale on credit of industrial, commercial or scientific equipment, or with respect to the sale or furnishing on credit of goods or merchandise or services by an enterprise to another enterprise The 10% rate applies to other interest.

k) The 0% rate applies to payments for the use of, or the right to use, copyrights of scientific works, patents, trademarks, designs or models, plans, and secret formulas or processes, as well as to information concerning industrial, com­mercial or scientific experience. The higher rate applies to other royalties.

l) The 0% rate applies to royalties paid for the use of, or the right to use, comput er software, patents, designs or models, or plans. The 5% rate applies to royalties paid for the use of, or right to use, secret formulas or processes, as well as for information (know-how) concerning industrial, commercial or scientific experience. The 10% rate applies to royalties paid for the use of, or the right to use, copyrights of literary, artistic or scientific works including cinematographic films, and films or tapes for television or radio broadcast­ing, or trademarks.

m) The 0% rate applies to dividends paid by a company resident in Ukraine to a company that is resident in Finland and that is the beneficial owner of the dividends if either of the following circumstances exists:

  • The Finnish Guarantee Board has issued an investment guarantee for divi­dends paid or for the capital invested on which the dividends are paid.
  • The recipient of the dividends has made an investment of at least USD1 mil­lion in the capital of the payer and holds at least 50% of the equity capital of the company paying the dividends.

The 0% rate is allowed with respect to dividends paid for any tax year within the period for which the above-mentioned guarantee is in force or, if no such guarantee is made, with respect to dividends paid for the first three years following the year in which the investment is made. The 5% rate applies to dividends paid to companies owning at least 20% of the capital of the payer. The 15% rate applies to other dividends.

n) The 0% rate applies if the interest is paid to the State of Finland, or a local authority or a statutory body thereof, the Bank of Finland, the Finnish Fund for Industrial Co-operation Ltd (FINNFUND) or the Finnish Export Credit Ltd or any similar institution. The 0% rate also applies to interest paid to a resident of Finland on a loan guaranteed by any of the bodies mentioned in the preceding sentence or by the Finnish Guarantee Board and paid to a resi­dent of Finland. The 5% rate applies to interest related to commercial credit. The 10% rate applies to other interest.

o) The 5% rate applies to dividends paid to companies that have invested at least USD50,000 in the capital of the payer or an equivalent amount in the curren­cies of the contracting states. The 15% rate applies to other dividends.

p) The 0% rate applies to the following types of interest:

  • Interest paid to government institutions
  • Interest on loans granted by banks
  • Interest paid with respect to sales on credit of merchandise, or industrial, commercial or scientific equipment

The 10% rate applies to other interest.

q) The 10% rate applies to dividends paid to the beneficial owner if, for an uninterrupted period of two years before the payment of the dividend, the beneficial owner owned directly at least 25% of the capital stock of the company paying the dividends. The higher rate applies to other interest.

r) The 0% rate applies to payments for the use of, or the right to use, software, patents, trademarks, designs or models, plans, or secret formulas or pro­cesses, or for information concerning industrial, commercial or scientific experience. The 10% rate applies to other royalties.

s) The 10% rate applies to royalties paid for the use of, or the right to use, patents, trademarks, designs or models, secret formulas or processes, as well as for information concerning industrial, commercial or scientific experi­ence. The 15% rate applies to other royalties.

t) The 0% rate applies if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 25% of the voting power of the payer of the dividends and if at least 50% of the voting power of the company that is the beneficial owner of the dividends is held by residents of the beneficial owner’s contracting state.

u) The 0% rate applies to the following:

  • Interest paid on loans provided, guaranteed or insured by a government of a state where the beneficial owner of the interest is located, or interest on loans made, guaranteed or insured on behalf of such government by an authority thereof that is so entrusted
  • Interest with respect to indebtedness arising on sales on credit by enter­prises of merchandise or industrial, commercial or scientific equipment to an enterprise of another contracting state, unless the sale or indebtedness is between related persons

The 10% rate applies to other interest payments.

v) The 0% rate applies to royalties paid for patents concerning industrial and manufacturing know-how or processes, agriculture, pharmaceuticals, com­puters, software, building constructions, secret formulas or processes, as well as for information concerning industrial, commercial or scientific experience. The 10% rate applies to other royalties.

w) The 0% rate applies to interest derived by the government, a political subdi­vision or a local authority, central bank of a contracting state or other finan­cial institution established and owned by the government to promote trade and investment, as well as to interest paid to residents of a contracting state with respect to debt-claims guaranteed or insured by the government, a local authority thereof, the central bank or other financial institution established and owned by the government to promote trade and investment. The 10% rate applies to interest paid on loans granted by banks or other financial institutions, including investment banks, savings banks and insurance com­panies. The 15% rate applies to other interest payments.

x) The 5% rate applies to royalties paid for the use of, or the right to use, pat­ents, plans, secret formulas or processes, as well as for information (know-how) concerning industrial, commercial or scientific experience. The 10% rate applies to other royalties.

y) The 0% rate applies to dividends paid to the government, a political subdivi­sion or local authority, central bank or other state financial institution. The 5% rate applies to dividends paid to companies owning at least 10% of the capital of the payer.

z) Notwithstanding the provisions allowing the 5% reduced rate (see footnote [d]), the 10% rate applies if the beneficial owner of the dividends is a com­pany that holds directly at least 10% of the capital of the company paying the dividends and if the dividend payer is a resident of Israel and the divi­dends are paid out of profits that are subject to tax in Israel at a rate that is lower than the normal rate of Israeli company tax.

(aa) A discrepancy exists between the Ukrainian and English texts of the Bel­gium treaty with respect to the withholding tax rates for interest and royal­ties. In the Ukrainian version, the highest treaty rate is 5%, while in the English version, it is 10%. The English version prevails in accordance with Para graph (e) of the protocol to the treaty.

(bb) The treaty does not apply to the Hong Kong Special Administrative Region (SAR).

(cc) The 0% rate applies to dividends paid to the government, a political subdivi­sion or local authority, the central bank or other state financial institution. The 5% rate applies to all other dividends.

(dd) The 0% rate applies to interest paid on loans granted by the government of a contracting state, including its political subdivisions and local authorities, the central bank or financial instrumentalities of that government. The 5% rate applies to interest paid on loans granted by banks. The 10% rate applies to all other interest payments.

(ee) If a resident of a contracting state has a permanent establishment in the other state, such permanent establishment may be subject to a withholding tax under the law of that other state. However, this tax may not exceed 10% of the amount of the profits of that permanent establishment after payment of the corporate tax on the profits.

(ff)      Interest arising in a contracting state and paid to the government of the other contracting state, political subdivisions thereof or agencies (including financial institutions) wholly owned by that government or a political sub­division is exempt from tax in the state where the income arises, unless the rule mentioned in the following sentence applies. Interest on securities, bonds or debentures issued by the government of a contracting state, political subdivisions thereof or agencies (including financial institutions) wholly owned by that government or political subdivision thereof is taxable only in that state.

(gg) The 5% rate applies to royalties paid for the use of, or right to use, scien­tific works, patents, trademarks, designs or models, plans, secret formulas or processes, or industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. The 10% rate applies to royalties paid for the use of, or the right to use, copyrights of literary or artistic works, including cinematographic films, and tapes for television or radio broadcasting.

(hh) Interest derived by the government of the contracting state including local authorities thereof, a political subdivision, the central bank or any financial institution controlled by such government, the capital of which is wholly owned by the government of the contracting state, is exempt from tax.

(ii)      The treaty rates do not apply to residents of a contracting state who perform their activity outside of this state if the income and profits of such persons are exempt from tax or are taxed at a substantially lower rate in such state.

(jj)      The 0% rate applies if interest is received and actually held by the govern­ment or a political subdivision. Interest paid to and held by a resident of one contracting state is exempt from tax in the other contracting state if it is paid with respect to a loan made, guaranteed or insured or with respect to any other debt claim or credit, if the loan, debt claim or credit is guaran­teed or insured on behalf of the first-mentioned state or by an authorized organ.

(kk) The 0% rate also applies if the interest is paid by a purchaser to a seller with respect to commercial credit resulting from deferred payments for goods, merchandise, equipment or services, unless the sale or indebtedness is between associated persons.

(ll)      The 0% rate also applies to interest paid to an institution (including a financial institution) with respect to a loan made under an agreement between the governments of the contracting states.

(mm) The reduced rates apply if the beneficial owner of the dividends is subject to tax with respect to such dividends.

(nn) The 0% rate also applies to interest arising in a contracting state and paid to a resident of the other contracting state that was established and operated exclusively to administer or provide benefits under one or more pension, retirement or other employee benefits plans if the following conditions are satisfied:

  • The recipient is the beneficial owner of the interest and is generally exempt from tax in the other state.
  • The interest is not derived from the carrying on of a trade or a business or from a related person.

(oo) The 0% rate also applies to interest paid with respect to indebtedness in curred in connection with the sale on credit of industrial, commercial or scientific equipment by an enterprise that is resident of one contracting state to an enterprise resident in the other contracting state, unless the sale or indebtedness is between associated enterprises.

(pp) Tax imposed on the earnings of a company attributable to a permanent establishment in a contracting state in addition to the tax that would be chargeable on the earnings of a company that is a national of that state may not exceed 5% of the amount of such earnings.

(qq) If a resident of a contracting state has a permanent establishment in the other state, such permanent establishment may be subject to a withholding tax under the law of that other state. However, this tax may not exceed 10% of the amount of the profits of that permanent establishment after payment of the corporate tax on the profits. This measure does not affect provisions contained in production-sharing contracts and contracts of work (or any other similar contracts) relating to the oil and gas sector or other mining sector entered into by the government of Indonesia, its instrumentalities, its relevant state oil and gas company or any other entities of the government of Indonesia, with a person that is a resident of the other contracting state.

(rr)      The 0% rate applies to the interest paid with respect to bonds, debentures or similar obligations of the government, political subdivisions, local authori­ties or the central bank.

(ss) The 0% rate applies to dividends if the beneficial owner of the dividends is the government, the central bank, or other government institutions or statu­tory bodies. The 5% rate applies to dividends if the beneficial owner is a company (other than a partnership) that holds directly at least 20% of the capital of the payer. The 15% rate applies to other dividends.

(tt)      The 10% rate applies to dividends paid to the beneficial owner of the divi­dends if the beneficial owner owns directly at least 25% of the capital stock of the company paying the dividends. The 15% rate applies to other divi­dends.

(uu) The 0% rate applies to interest received and belonging to the government, political subdivisions, local authorities or the central bank.

(vv) The double tax treaty with Yugoslavia applies to Serbia and Montenegro.

(ww) The 0% rate applies to royalties paid for the use of, or the right to use, copyrights of literary, artistic or scientific works, including cinemato­graphic films and films or tapes for radio or television broadcasting. The 10% rate applies to the royalties for the use of, or the right to use, patents, trademarks, designs or models, plans, secret formulas or processes, or industrial, commercial or scientific equipment, or for information concern­ing industrial, commercial or scientific experience.

(xx) The 5% rate applies to dividends paid to the beneficial owner of the divi­dends if such owner holds at least 20% of the capital of the company paying the dividends or has invested in the acquisition of the shares or other rights of the company the equivalent of at least EUR100,000. The 15% rate applies in all other cases.

(yy) The 5% rate applies to royalties with respect to copyrights of scientific works, patents, trademarks, secret formulas, processes or information con­cerning industrial, commercial or scientific experience. The 10% rate ap­plies in other cases.

(zz) The 0% rate applies to the following types of interest:

  • Interest paid to or by the state, political subdivision or central bank
  • Interest arising and paid with respect to a loan granted for a term over three years that is guaranteed or insured or to a credit granted for a term over three years that is guaranteed or insured by the authorized state institutions

The 10% rate applies in other cases. The procedure for application of these restrictions will be set by the competent authorities of Mexico and Ukraine. (aaa) The 0% rate applies to interest if any of the following circumstances exist:

  • The beneficial owner of the interest is the government or an agency authorized by the government.
  • The interest is paid with respect to loans made, guaranteed or issued by or on behalf of the government or an agency authorized by the govern­ment.
  • The interest is paid with respect to debt claims that are warranted, insured, or directly or indirectly financed by the government or an agency authorized by the government.

The 5% rate applies to interest paid in connection with the sale on credit of industrial, commercial or scientific equipment, or in connection with loans granted by banks. The 10% rate applies in all other cases if the recipient of the interest is resident in either treaty state and is the beneficial owner of the interest.

(bbb) See footnote (b) in Section A.

Ukraine has ratified a double tax treaty with Cuba, but this treaty is pending.

Ukraine has signed a double tax treaty with Malta, but this treaty has not yet been ratified.

Ukraine signed a tax treaty with Luxembourg, but the Ukrainian parliament did not ratify it. Reportedly, the ratification process was recently re-launched.

The Ukrainian government authorized the Minister of Finance to sign a double tax treaty with Sri Lanka.

Ukraine is negotiating double tax treaties with Guinea and Tunisia. Ukraine is negotiating a new double tax treaty with Cyprus.