On June 20, 2023, Ukraine and the Federal Republic of Germany signed a new Agreement to Eliminate Double Taxation, establishing clear rules for allocating tax rights between the states. This document aims to eliminate double taxation, prevent tax evasion, and establish stable business conditions. Ukrainian Finance Minister Serhiy Marchenko emphasized that the signing of the agreement represents a strategic step for the development of economic cooperation, ensuring transparent and predictable tax conditions for investors and the business community. Once in effect, the new agreement will replace the existing treaty dated July 3, 1995.
The agreement is aligned with the standards of the Organization for Economic Cooperation and Development (OECD). It introduces changes to tax rates on passive income based on the income source:
– Dividends: the 5% rate remains for companies owning at least 20% of capital; in other cases, the rate increases from 10% to 15%.
– Interest: the rate increases from 2% to 5% for interest paid on credit sales and loans provided by banks and financial institutions.
– Royalties: the previous zero rate has been abolished, with a unified rate of 5% established.
Furthermore, the agreement includes provisions to prevent the abuse of tax benefits, expand the exchange of tax information between the competent authorities of both countries, and implement dispute resolution mechanisms to protect taxpayer rights.
