17 September 2021
Protocol amending Ukraine-Netherlands double tax treaty is in force and applies starting 2022
On 15 June 2021, the Parliament of Ukraine ratified the Protocol on Amendments to the Agreement on the Avoidance of Double Taxation between Ukraine and the Netherlands (the “Protocol”). The Ministry of Foreign Affairs of Ukraine has recently announced that the relevant procedures for bringing the Protocol into force have been completed (Letter of Ministry of Foreign Affairs No 72/11-612/1-58906 of 10 August 2021). Therefore, the Protocol came into force on 31 August 2021, but, in respect of taxes, it will apply from 1 January 2022.
The Protocol provides:
- for dividends:
- cancellation of the zero-tax rate for withholding tax on qualifying dividends (direct holding of at least 50 per cent of the capital of the company paying the dividends and a minimum investment of USD 300,000);
- the conditions for applying the 5 per cent rate and the 15 per cent rate remain unchanged;
- for interest:
- increase of the withholding tax rate from 2 per cent to 5 per cent;
- cancellation of the 10 per cent rate, so if the 5 per cent rate does not apply, the Ukrainian 15 per cent withholding tax rate is used;
- for royalties:
- increase of the withholding tax rate from zero to 5 per cent on royalty payments related to certain intellectual property payments (e.g. patent, trade mark, design or model).
Importantly, among other changes, the Protocol also:
- incorporates the principal purpose test into the double tax treaty (see the new Article 24A “Entitlement to Benefits”);
- improves the mutual agreement procedure and exchange of information.
If you would like to know more about the subject covered in this publication, please contact Rob Shantz, Partner, Oleksandr Markov, Counsel, or Kateryna Kuzmenko, Tax Consultant.