On November 22, 2016, the Minister of Finance of Ukraine handed an official letter on Ukraine’s accession to the BEPS (Base Erosion and Profit Shifting) plan to the Secretary-General of OECD. Being the final stage in the process of joining the project, Ukraine is to become a member of the Inclusive Framework on BEPS starting from January 01, 2017.
BEPS project’ 15 Action plan is aimed at combatting aggressive tax planning and equipping governments with the appropriate instruments. The ultimate goal of BEPS is to create an international taxation control system of multinational companies, which would allow to tax income in those jurisdictions where it is generated. In particular, BEPS Actions cover, among others, the following measures:
- Addressing the tax challenges of digital economy;
- Neutralizing effects of hybrid instruments and entities;
- Designing effective CFC rules;
- Preventing base erosion by exploiting interest deduction;
- Combatting harmful tax practices;
- Preventing treaty abuse;
- Fighting the misuse of permanent establishment statues;
- Improving transfer pricing rules;
- Designing mandatory disclosure rules;
- Revising country-by-country reporting;
- Developing dispute resolution mechanisms.
As a BEPS member, Ukraine would be obliged to implement four minimum standards, such as countering harmful tax practices, preventing treaty abuse, designing mandatory disclosure rules as to aggressive tax planning, and enhancing dispute resolution in application double-tax treaties.
In the view of Ukraine’s Ministry of Finance, Ukraine's accession to BEPS is a positive sign for investors which is expected to stimulate international trade and promote the growth of Ukrainian economy.