?Introduction
Dividends
Interest
Capital gains


Introduction

The Ministry of Finance has announced that the protocol to the double tax agreement between Cyprus and Ukraine, which was agreed in September 2015, was formally signed on December 11 2015 (for further information please see "Protocol amending double tax agreement between Cyprus and Ukraine agreed"). The existing double tax agreement entered into force on January 1 2014. The protocol, when formally ratified by both countries, will enter into force no earlier than January 1 2019.

According to the Ministry of Finance's announcement, a 'most favoured nation' clause has been agreed for taxes on interest, dividends, royalties and capital gains, ensuring that Cyprus is treated no less favourably than any of Ukraine's other double tax agreement counterparties.

An announcement on the website of the Ukrainian Ministry of Finance provides more details of the protocol's amendments.

Dividends

The existing double tax agreement provides for a withholding tax of 15% on dividends paid by Ukrainian companies to Cypriot shareholders, with a reduced rate of 5% if the beneficial owner owns more than 20% of the share capital of the company paying the dividend or has invested more than €100,000 in shares. Under the protocol, the lower rate will apply only if both conditions are satisfied.

Interest

Under the existing agreement, the rate of withholding tax on interest paid by a Ukrainian debtor to a beneficial owner in Cyprus is 2%. When the protocol takes effect, the rate will increase to 5%.

Capital gains

The existing agreement provides that capital gains derived from movable property – including shares in property-rich companies, whose assets principally comprise immovable property – are taxable only in the country of residence of the person making the disposal. When the protocol comes into force, gains on shares in property-rich companies will also be taxable in the country in which the immovable property is located.

For further information on this topic please contact Philippos Aristotelous at Andreas Neocleous & Co LLC by telephone (+357 25 110 000) or email (aristotelous@neocleous.com). The Andreas Neocleous & Co LLC website can be accessed at www.neocleous.com.