Ukraine and Switzerland Signed Protocol to Avoid Double Taxation

On January 24, 2019, the Minister of Finance and the President of Switzerland signed a Protocol on Amendments to the Convention between the Government of Ukraine and the Swiss Confederation for avoidance of double taxation with respect to taxes on income and capital.

The conclusion of the Protocol is aimed at avoiding double taxation on incomes of individuals and legal entities in the territories of both countries. This will be achieved both by distributing the right to tax certain types of income between Ukraine and Switzerland, depending on the place of their origin, and by taking into account the tax liabilities of a tax payer of one state and the amount of taxes paid on the territory of another state.

The provisions of the Protocol comply with the requirements of the OECD Model Convention and the BEPS Action Plan (the rules of countering the tax base erosion and thededuction of profits from taxation).

The signed Protocol between Ukraine and the Swiss Confederation provides for:

an increase in the tax rates on interest and royalties from 0% to 5%;
supplementing a new article on improving the procedure for mutual coordination (tax disputes resolution) through arbitration;
the amended article on information sharing, aimed at the empowering the Contracting States to exchange tax information without reservations, regarding the national tax interest or bank secrecy requirements;
the eligibility rules on benefits – no benefits will be provided in relation to the type of income or property, if one of the main objectives of any arrangements or agreements between business entities is to receive, directly or indirectly, such an advantage. These rates and provisions are consistent with the general practice of Ukraine, concluding such international treaties for the avoidance of double taxation and their protocols.

After signing the Protocol, Ukraine and Switzerland must implement the internal procedures necessary for ratification of the Protocol.