Ratification Of The Luxembourg - Ukraine Double Tax Treaty And Its Protocol

The Convention between Ukraine and Luxembourg for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital and its Protocol have been ratified by the Government of Ukraine.

Background

On 6 September 1997 Luxembourg and Ukraine signed a first treaty ("Treaty"), which has been amended by a protocol signed on 30 September 2016 ("Protocol").

Both have been ratified by Luxembourg, on 1 August 2001 and 23 December 2016 respectively. Ukraine ratified the Treaty and the Protocol on 14 March 2017.

The Treaty and Protocol will enter into force once the parties have notified each other on completion of the procedures required by their domestic law and shall directly apply:

in respect of taxes withheld at source, to income derived on or after 1 January of the calendar year following the year in which the Treaty and the Protocol enters into force; in respect of other taxes on income and taxes on capital, to taxes chargeable for any taxable year beginning on or after 1 January of the next calendar year following the year in which the Treaty and the Protocol enters into force. It is expected that the exchange of notifications will be completed this year so that the Treaty and Protocol will have effect as from 1 January 2018.

Withholding tax rates

The Treaty as amended by the Protocol sets out the following withholding tax rates:

Dividends (art. 10) Interest (art. 11) Royalties (art. 12) Basic rate 15% 10% 10% for the use of, or the right to use, any copyright of literacy, artistic or scientific work (including cinematograph films and films or tapes for radio or television broadcasting) Reduced rate 5% (for participations of 20% or more of the capital of the dividend paying company (other than partnership)) 5% on interests paid on a loan granted by a bank or any other financial institution, including investment banks and saving banks 5% for the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or for information (know-how) concerning industrial, commercial or scientific experience Exemption n/a 0% on interest paid (i) on a loan made, guaranteed or insured by, or (ii) on any other debt claim or credit guaranteed or insured by an authorised public body of the State n/a It is worth mentioning that under the Luxembourg domestic tax legislation currently in force (i) a full exemption from the withholding tax on dividends paid by a Luxembourg resident...