Key provisions of the new convention signed with Ukraine – 12/12/2012
A new tax treaty has been signed between Cyprus and Ukraine. The treaty will come into effect on the 1st of January following the year in which the parties exchange notifications of ratifications.
The main provisions of the treaty are explained below.
There will be withholding tax at 5% on dividends if the beneficial owner holds at least 20% of the capital of the company which pays the dividends or has investment in the acquisition of shares/ rights of the company paying the dividends of at least €100.000. In all other cases, the withholding tax is 15%.
Interest payments to a beneficiary who is a resident of the other Contracting State shall be subject to withholding tax of no more than 2% of the gross amount of the interest.
In the case of royalties on any patent, trademark, secret formula or process concerning industrial, commercial or scientific experience, the tax levied will not exceed 5% of the gross amount of the royalties. The responsible authorities of the Contracting States shall, by mutual agreement, set the method of application of this limitation.
Payment of royalties of general nature to a beneficiary who is a resident of the other Contracting State shall be subject to withholding tax which does not exceed 10% of the gross amount of the royalties.
Gains from the sale of shares will only be taxable in the Contracting State of which the seller is resident even if they are in respect of profits from the sale of shares or similar rights of a company that derive more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State.
The treaty clarifies that a building site or construction site will constitute a permanent establishment only if it lasts more than 12 months.
Exchange of Information
The Convention adopts the new article on Information Exchange of the Model Convention of the Organisation for Economic Cooperation and Development (OECD). The Protocol to the Convention sets out in detail the procedures needed to exchange information and ensure that the information requested is relevant.
The contract does not include any provision that restricts the benefits which may arise.