By Leonid Karpov, Partner, AC Crowe, Ukraine
On 30 October, Ukraine’s Parliament ratified a protocol amending the tax treaty between the governments of Ukraine and Cyprus for the avoidance of double taxation. It is anticipated that the protocol will take effect on 1 January 2020.
It is expected that the tax treaty protocol will provide that no withholding tax will arise if a Cypriot company transfers shares of a Ukrainian corporate investment fund, which directly or indirectly owns real estate located on the territory of Ukraine if the real estate constitutes less than 50% of the company’s assets.
Nor will such tax arise if the Ukrainian corporate investment fund has been set up as a public joint stock company or its shares are quoted on a stock exchange or the real estate property owned by the Ukrainian corporate investment fund is leased, or if that property is otherwise used for business activities.
Mutual fund certificates are not deemed to be shares. Article 13, clause 6, of the Ukraine-Cyprus tax treaty protocol regulates the disposal of such certificates. Gains received Cypriot company from this disposal shall be taxable only in Cyprus provided that those gains are subject to tax in Cyprus.
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