The Double Taxation Relief (Taxes on Income) (Ukraine) Order 1993

Explanatory Note

(This note is not part of the Order)

The Convention with Ukraine is set out in the Schedule to this Order.

The Convention provides for business profits not arising from a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and capital gains derived from such property may be taxed in the country in which the property is situated (Article 6 and 13).

Shipping and air transport profits are generally to be taxed only in the residence state of the operator (Aricle 8).

The Convention includes rules for determining the taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other is not to exceed 5 per cent of the gross amount of the dividends when the beneficial owner is a company controlling, in the case of the United Kingdom, at least 20 per cent of the voting power in the company paying the dividends and in the case of Ukraine at least 20 per cent of the authorised capital in the company paying the dividends, and 10 per cent in all other cases (Article 10).

Subject to certain anti-avoidance provisions the country of source will exempt from tax interest and royalties paid to a resident of the other country (Articles 11 and 12).

Capital gains arising from the disposal of moveable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, to be taxed only in the country of the taxpayers residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 18). Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are performed (Article 19). Occupational pensions (other than those paid in respect of government service) and annuities are to be taxed only on the recipient’s country of residence (Article 18) while government service remuneration and pensions are normally to be taxed only by the paying Government (Article 19). Payments made to visiting students, apprentices and business trainees are generally exempt from tax in the country visited (Article 20). Other income (with the exception of income from trusts and estates of deceased persons under administration) not specified in the Convention remains taxable only in the recipient’s country of residence unless the income is attributable to a permanent establishment or fixed base that the taxpayer has in the country of source (Article 21).

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. In the case of dividends, the United Kingdom will give credit for underlying tax paid in Ukraine where the shareholder is a United Kingdom company which controls at least 10 per cent of the voting power in the company paying the dividends (Article 22).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 25), and for consultation (Article 26) and exchanges of information (Article 27) between the taxation authorities of the two countries.

The Convention will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Convention is to take effect in the United Kingdom on or after 1st April in respect of corporation tax and on or after 6th April for income tax and capital gains tax in the calendar year next following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.