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Ukraine, Austria seek to increase tax rates for dividends, interest rates, royalty

Ukraine, Austria seek to increase tax rates for dividends, interest rates, royaltyRepresentatives of the Ukrainian and Austrian governments have signed a protocol paving the way to increase tax rates for dividends, interest rates, and royalty, the Ukrainian Finance Ministry has reported on its website.

According to the report, the protocol was signed after Ukrainian-Austrian negotiations on the review of the bilateral Convention on the Avoidance of Double Taxation and Prevention of Evasion of Income and Property Taxes in Vienna initiated by the Ukrainian Finance Ministry.

"The Ministry of Finance is actively working to close loops in the regulations which make tax evasion possible. This work includes the adjustment of the current international agreements on the avoidance of double taxation to the international standards," the ministry said.

The ministry said that the protocol, the tax rate for dividends shall be increased from 10% to 15% and the tax rate for interest rate - from 2% to 5%.

In addition, the royalty rate for patents, trademarks, industrial design, plans, models, product formulas or processes shall be increased from 0% to 5% and the royalty rate for the copyright of literary works, artworks including cinema - from 5% to 10%.
The ministry recalled that the bilateral Convention on the Avoidance of Double Taxation and Prevention of Evasion of Income and Property Taxes was signed by Ukraine and Vienna in 1997 and is now not compatible with valid international standards.

"Following the negotiations initiated by the Ukrainian side, the parties agreed to adjust the above Agreement to the OECD [the Organization for Economic Co-operation and Development] Model Tax Convention on Income and Capital," the ministry said.
The protocol contains special supplementary regulations on the expanded bilateral exchange of tax data and assistance in tax collection according to the OECD standards.

The ministry said that though Ukraine is not an OECD member, Ukraine's Cabinet of Ministers in February 2013 adopted the action plan set to deepen cooperation between Ukraine and the OECD in the period from 2013 till 2016.

"Due to the review of all international agreements on the avoidance of double taxation, a single approach was elaborated for their examination as well as for the elaboration of draft agreements to adjust them to the OECD Model Convention," the ministry said.
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