Changes to Ukraine-Netherlands Double Tax Treaty come into force

Ukraine

On 15 June 2021, the Ukrainian parliament passed a law ratifying the Protocol amending the Convention between the Netherlands and Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion for Taxes on Income and on Property (the “Protocol”) signed in the Hague on 12 March 2018, as amended through exchange of notes in 2019 and 2020.

The Protocol sets following withholding tax rates on core types of passive income:

  • Dividends: 5% (for shareholders owning at least 20% of the capital of the company paying the dividends) and 15% (for other shareholders);
  • Interest: 0% (for state bonds and loan guarantees or insured by the state) and 5% (for other lending);
  • Royalty: 5% (for copyright of scientific work, patent, trade mark, other industrial IP) and 10% (for copyright of literary or artistic work).

Apart from above changes, the Protocol also introduces a limitation of benefits clause in line with OECD standards, expands the exchange of fiscal information between the states, clarifies rules on elimination of double taxation and mutual agreement procedures, and updates taxation rules for income from pensions and other annuities.

The ratification law is scheduled to enter into force on 18 July 2021. Meanwhile the Protocol will enter into force for both of the state parties on the last day of the month following the month in which the exchange of diplomatic notifications is concluded, which is expected in the near future. If the Protocol enters into force in 2021, the changes introduced hereof will affect income and taxes on or after 1 January 2022. 

See our previous publication on this topic: Ukraine and The Netherlands amend the Agreement on the Avoidance of Double Taxation.

For more information on latest developments in taxation of income between Ukraine and the Netherlands and how it may affect your business, consult with your regular CMS contact or our local CMS experts: Ihor OlekhovAnna Pogrebna.

Legislation:

Law of Ukraine No. 1548-IX dated 15 June 2021 “On ratifying the Protocol amending the Convention between the Netherlands and Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion for Taxes on Income and on Property” (in Ukrainian).