Monday, March 12, 2018

Ukraine and the Kingdom of the Netherlands have signed a Protocol to amend the Convention on the Avoidance of Double Taxation

Today, in the framework of bilateral cooperation, the Minister of Finance Oleksandr Danyliuk, together with the Secretary of State of the Ministry of Finance of the Netherlands, Menno Snel, signed the Protocol amending the Convention between Ukraine and the Kingdom of the Netherlands on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property.

The conclusion of this Protocol is aimed at avoiding the double taxation of incomes of individuals and legal entities that arise in the territories of both countries. This will be achieved through the distribution of the right to tax certain types of income between Ukraine and the Kingdom of the Netherlands, depending on their place of origin, and by taking into account in tax obligations of the taxpayer of one state the amounts of taxes paid in the territory of another state.

What does this give?

- creates favorable conditions for investors of Ukraine and the Kingdom of the Netherlands;
- stimulates the business initiative of entrepreneurs;
- regulates issues of international taxation of income in bilateral relations between states.

This will allow:
- to prevent tax evasion while reducing the pressure on law-abiding taxpayers;
- eliminate tax discrimination;
- create mechanisms for improving cooperation between the tax authorities of Ukraine and the Kingdom of the Netherlands by establishing procedures for the mutual harmonization of disputed issues;
- ensure the exchange of tax information.

The protocol provides:
- dividend tax at the rate of 5% - if the beneficial owner of the dividends is a company (other than a partnership) that owns at least 20% of the company's capital paying dividends and 15% - in all other cases (excluding provisions for the taxation of dividends at the rate of 0% );
- increase in the rate of interest taxation - from 2% to 5%;
- Setting the royalty rate at the level of 5% and 10% (excluding the provision for royalty taxation at 0%);
- a new version of the article on the exchange of information, which provides for a significant expansion of the ability of the Contracting Parties to exchange tax information.

For reference
The draft Protocol was agreed during the negotiations that took place from April 5 to 9, 2016 in the city of The Hague (Kingdom of the Netherlands).