The Ministry of Finance of Ukraine has prepared the Route Map for the implementation of the BEPS Action Plan (BEPS stands for “Base erosion and Profit Shifting”) and presented it to experts.
What’s it about?
Gaps and incompatibility in and between the national and international tax regulations make it possible for international companies to reduce or evade profit tax payments. This results in revenue losses for the respective countries.
It took the OECD countries and members of the G20 two years to prepare the BEPS Action Plan and the Extended Cooperation Program to set so-called rules of the game for countries to formulate their tax planning strategies. Companies which have been indulging in tax evasion so far won’t be able to do it anymore and state budget revenues will be collected in full. This BEPS mechanism is crucial for developing economies which strongly depend on the corporate profit tax revenues.
On January 1, 2017, Ukraine also joined the Extended Cooperation Program as a member of OECD and obliged itself to implement the so-called Minimum standard of the BEPS Action Plan including four mandatory steps out of the fifteen proposed ones.
What’s the benefit for Ukraine?
The implementation of the Minimum standard of the BEPS Action Plan will enable Ukraine to effectively tackle aggressive tax optimization, taxation base erosion and profit shifting.
“First, we must ensure profit taxation where added value is generated and business activity is pursued. Second, we will be resisting deliberate profit shifting aimed to evade taxes in Ukraine”, Minister of Finance Oleksandr Danyliuk said presenting the Route Map developed by the Ministry of Finance during the meeting which took place at the National Bank of Ukraine on April 28, 2017.
The implementation of the Minimum standard is mandatory for all countries participating in the Extended Cooperation Program. The Ministry of Finance also supports the initiative for the further implementation of the BEPS Action Plan jointly with OECD.
• Minimum standard – mandatory 4 out of 15 steps which must be implemented by each participating state. The obligation of Ukraine is to implement the Minimum standard of the BEPS Action Plan;
• The Extended Cooperation Program (inclusive framework) is a dialogue platform for countries aimed to contribute to the implementation of steps to tackle base erosion and profit shifting;
• The Minimum standard comprises four mandatory steps:
- Harmful taxation practices or harmful tax regimes – STEP 5 of the BEPS Action Plan;
- Improvement of the existing agreements on the avoidance of double taxation by incorporating the proposed rules for the prevention of the agreement misuse - STEP 6 of the BEPS Action Plan;
- Improvement of national regulations on TFP documentation and future information exchange – STEP 13 of the BEPS Action Plan;
- Improvement of the existing agreements on the avoidance of double taxation by increasing the effectiveness of mechanisms for dispute settlement – STEP 14 of the BEPS Action Plan.