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A De-Offshorization initiative has been launched in Ukraine including - Anti-BEPS

16 May 2016

A De-Offshorization initiative has been launched in Ukraine including -  Anti-BEPS

The Ukrainian Government has announced that they are looking to tackle what they see as the leakage of profits to offshore locations and tax evasion through aggressive planning.

This has always been a hot topic on a political agenda in Ukraine, however, it must be said that little (with an exception of introduction of transfer pricing rules in 2013) has been done to address the issue comprehensively. An overarching tax reform was not completed in 2015, and has dragged on into 2016.

On 28 April 2016 the President of Ukraine signed the Decree entitled: "On actions concerning countering of tax base erosion and profit shifting" calling for a creation of a special Working Group who were tasked with the objective of drafting laws embodying a comprehensive de-offshorisation reform by mid June 2016.

The Working Group have as a consequence recently released a concept paper listing the main features points to these upcoming reforms. They include:

  • Establishing the control of foreign companies (CFC) rules;
  • Automatic exchange of tax information (including joining the FATCA and Common Reporting Standard Multilateral Competent Authorities Agreement);
  • Recognition of foreign entities as tax residents within Ukraine (place of control rules);
  • Limitations on interest deduction and other financial payments;
  • Preventing the DTT abuse (via general anti-avoidance rules or limitation on benefits clause to double taxation treaties);
  • Prevention of artificial avoidance of permanent establishment (PE) status;
  • Changes in transfer pricing rules (introduction of country-by-country reporting and the group's master file);
  • New VAT rules for e-commerce;
  • Liberalisation of currency control.

It is clear that then reforms are an attempt to implement recommendations of the OECD BEPS action plan into Ukrainian tax law.

Specifically the reforms will attempt to counter the leakage of funds to offshore locations as well as aggressive tax practices, establishing transparency and working to the rules established by the OECD.

For more information and to find out how Whitmill can help please contact Phillip Evans on +44 (0)1534 886128

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