On 8 August 2019, Ukraine deposited with OECD its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). This represents the completion of all MLI ratification procedures for Ukraine and this instrument will come into force in Ukraine on 1 December 2019.
Ukraine has become 31st country to deposit the instruments of ratification with the MLI now signed by 89 jurisdictions.
The MLI modifies the application of thousands of bilateral tax treaties concluded worldwide to eliminate double taxation. Containing the flexibility to accommodate specific tax treaty policies, the MLI also implements agreed minimum standards to counter treaty abuse, improve dispute resolution mechanisms and decrease the opportunity of multinational companies to avoid taxes.
With Ukraine's MLI ratification, companies should now be aware that upcoming changes to the taxation of international transactions could trigger tax disputes involving Ukraine-based subsidiaries of multinational corporations, which should begin proactive steps to substantiate the commercial rationale behind their corporate models and transactions. With this in mind, multinational corporations should also monitor how the MLI will affect applicable tax treaties and re-examine their corporate and international structures in order to comply with the updated rules.
For further information on effect of the MLI on the operation of your cross-border business and operations, please contact one of our local CMS experts.
Previous Law-Now articles on the MLI include:
Ukraine signs Multilateral Convention to Prevent BEPS
Update: Ukraine ratifies Multilateral Convention to prevent BEPS