Following the proposal of the Ministry of Finance, the Parliament has ratified the Agreement with Luxemburg on the avoidance of double taxation and prevention of tax evasion regarding income and capital tax. It has also ratified the amendment protocol to the Agreement.
What’s it about?
On September 30, 2016, Minister of Finance Oleksandr Danyliuk and Ambassador of Luxemburg to Ukraine Michele Pranchere-Tomassini signed the Protocol of amendments to the Agreement on the avoidance of double taxation which is a part of the cooperation between the two countries.
Today, the Parliament has adopted the law ratifying the Agreement and the Protocol.
This is one more step aimed to improve the conditions for taxpayers in both countries.
To make it possible, the Agreement stipulates the distribution of taxation powers regarding various types of income between Ukraine and Luxemburg depending on the origin of the income as well as the acknowledgement of taxes paid in the respective country when calculating tax obligations in the second country.
What’s the advantage?
- the Agreement prevents tax evasion;
- the Agreement removes tax discrimination;
- the Agreement establishes mechanisms to improve cooperation between the tax authorities of Ukraine and Luxemburg by setting procedures for dispute settlement;
- the Agreement ensures exchange of tax data;
- the Agreement establishes favorable conditions for investors from both countries;
- the Agreement stimulates business activity;
- the Agreement regulates international taxation issues in the relationship between the two countries.
The Protocol sets the following tax rates for passive income:
Dividends – general rate is 15%; 5% is applied for dividends received by a company owning at least 20% of the shares of the company which pays the dividends;
Interest rate – general rate is 10%; 5% is applied for interest rate paid on the loaned purchase of industrial, commercialу or scientific equipment as well as for interest on bank loans;
Royalty – general rate is 10%; 5% is applied for royalty for copyright on scientific works, patents, trademarks, secret formulas, processes or information related to industrial, commercial or scientific know-how.