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Ukraine clarifies effective date of new Treaty with Cyprus
The Double Tax Treaty (DTT) between Cyprus and Ukraine entered into force 7 August 2013, however Article 26 paragraph 2 has generated extensive confusion on when the USSR – Cyprus Treaty would lose effect. Taxand Cyprus clarifies the timings of the DTTs.
The English text of the Treaty stated that the USSR – Cyprus treaty should end on the date the Treaty would take effect but not on the date it would take force. However, the Ukrainian text of the new Treaty provided that the USSR – Cyprus Treaty would terminate once the new Treaty enters into force.
This initiated the risk that the Ukrainian Tax authorities, might on the basis of the Ukrainian text, contend that the USSR – Cyprus Treaty would be eliminated when the new Treaty has been ratified.
That would crucially mean that until the end of the year there would be no protection for dividend distributions, interest and royalties payments between Ukraine and Cyprus.
As a result, on 10 October 2013 the Ukrainian Ministry of Foreign Affairs issued Letter No. N 72/14-612/1-3330 introducing an amended Ukrainian version of Article 26, para. 2 of the new DTT regarding its effective date.
By virtue of this clarification, as from 1 January 2014 a new era between Cyprus and Ukraine will commence since the new Treaty will significantly safeguard the dominant position of Cyprus into Ukraine’s foreign investments.
The amended version of Article 26 paragraph 2 specifies and clarifies that the USSR – Cyprus Treaty of 1982 is considered to be terminated on the date when the new tax treaty becomes effective, 1 January 2014. Multinationals with operations in either of these jurisdictions should research the new Treaty to ascertain any favourable aspects relevant to their situation.