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Guide to Ukraine’s Tax Code: Investment and Cross Border Transactions

Ukraine

The Tax Code of 2 December 2010 will refresh Ukraine's tax system, which is regarded as one of the most difficult in the world. Due to the codification the revised tax system is a bit simpler and more rational. As a general comment it is noted that in 2011 corporate profits tax rate was reduced to 23% and the VAT rate remained at 20%. The main part of the code takes effect as of 1 January 2011 whereby the corporate profits tax section is effective from 1 April 2011 and the introduction of some clauses is postponed to 2012-2015. Taxand Ukraine presents a summary of key changes to Ukraine's tax regime which are relevant to investment and cross border transactions.

Taxand's Take


The key risk factors for multinational companies operating in Ukraine are:
  • limitation of cross border service fees/royalty deductibility
  • risk of a permanent establishment as a result of the provision of services on the territory of Ukraine
  • exposure to disputes with the tax authorities regarding double tax treaty benefits if the beneficial ownership criteria is enforced

In order to manage risks that may arise due to changes in Ukraine's tax regime, it is necessary to review intra-group service arrangements and take corrective measures. The Tax Code's transition rules provide that no tax fines shall be applied until 30 June 2011.

Your Taxand contact for further queries is:
Vladimir Didenko
T. +380 44 492 8282
E. vdidenko@magisters.com

Download the full guide to Ukraine's tax code here:

Taxand's Take Author