Tax and International Trade Update

В настоящей публикации рассматриваются инновации украинского права в сфере международной торговли и налогообложения. А именно:

  • либерализация порядка определения таможенной стоимости товаров, импортируемых в Украину;
  • подписание Протокола к Конвенции между Правительством Украины и Правительством Великого Герцогства Люксембург об избежании двойного налогообложения и предупреждении налоговых уклонений относительно налогов на доходы и на капитал;
  • подписание Соглашения о свободной торговле между Украиной и Канадой;
  • принятие постановления Кабинета Министров Украины «Об утверждении перечня товаров, имеющих биржевую котировку, и мировых товарных бирж для установления соответствия условий контролируемых операций принципу «вытянутой руки»» № 616 от 08.09.2016.

Liberalization of customs valuation procedure

Within the framework of its gradual liberalization policy, the Cabinet of Ministers of Ukraine (CMU) introduced certain changes to the applicable legislation related to determination of customs value of imported goods into Ukraine. The CMU adopted the Resolution of the CMU No. 686 dated 5 October 2016 (Resolution 686) which has abolished the Resolution of the CMU No. 724 dated 16 September 2015 (Resolution 724) that allowed customs authorities (SFS state servants) to compare the declared customs value of the imported goods with the average value for identical (similar) goods, imported by other declarants for the past 6 months and declared under relevant UKTZED code. By abolishing Resolution 724, CMU revoked the power of customs authorities to compare the declared customs value of particular goods/products with average customs value of goods that may significantly differ from the goods imported earlier, by quality, quantity, origin or other important characteristics. The procedure is aimed at liberalization and simplification of the customs procedures.

Protocol to the Convention on Avoidance of Double Taxation with Luxembourg

On 30 September 2016, the Ukrainian government signed a protocol (Protocol) to the Convention between the Government of Ukraine and the Government of the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital (Convention). The Convention itself was signed in 1997 but was not ratified because certain provisions related to reduced rates of dividends and interests were not agreed between the parties.

After signing the Protocol the following withholding tax rates will apply to income in the form of dividends, interest and royalty income:

  • Dividends – 5 percent, if the dividend recipient owns at least 20 percent of the capital of the dividend paying company; 15 percent in other cases;
  • Interest – 5 percent if interest is paid (1) on the sale on credit of industrial, commercial or scientific equipment and (2) on bank loans; 10 percent in other cases;
  • Royalties – 5 percent would apply to copyright royalties, payable for scientific work, patent, trade mark, secret formula, process, or for information concerning industrial, commercial or scientific experience, 10 percent in other cases.

The provisions related to exchange of information set forth in Protocol were brought in line with OECD standards. The Convention and the Protocol has not come into force yet, due to formal procedures that should be completed before the international treaties to come into effect.

By signing the Protocol, Ukraine has improved the investment climate with the Grand-Duchy of Luxembourg, a dynamic and open economy which actively promotes the development of financing, trade and investments.

Free Trade Zone with Canada

On 11 July 2016, the Canada-Ukraine Free Trade Zone Agreement (Agreement) was signed. The major provisions of the Agreement are the following:

  • Canada opens for Ukrainian 98 percent of its market of goods, subject of bilateral trade, for export.
  • Canada and Ukraine apply principle of asymmetric tariff obligations that will allow Ukraine to gradually adapt to free trade regime with Canada.
  • Ukraine would implement the full liberalization (the abolishment of import duties) for 72 percent of the goods, liberalization for 27 percent of products using transitional periods of three, five and seven years; the partial liberalization for sensitive agricultural products.
  • Canada and Ukraine apply a number of rules and obligations relating to non-tariff measures that will help to ensure that market access is not limited by unjustified barriers to trade.
  • The companies receive preferential access to participation in public procurement at the government level of both states. Ukrainian suppliers will have the right to a fair, non-discriminatory and predictable access to tenders.
  • Obligations are taken to the protection and enforcement of intellectual property rights.
  • Cooperation on trade issues and the provision of technical assistance from Canada to Ukraine is envisaged.
  • There are preferential conditions for agricultural products.

Access to Ukrainian market

Agro products – the phased abolishment of import duties:

  • Three years for: live sheep and poultry, beef and lamb, nuts, products of flour and cereals sector, sauces, soups, harvesting, etc.
  • Five years for: separate pork offal products, fruits oilseeds and oil seeds, other fats, vegetable oil, etc.
  • Seven years for: fresh or chilled pork, fresh or chilled poultry offal products and poultry, milk and cream, eggs, honey, vegetables, sausages, etc.

Partial liberalization:

  • Chilled meat and poultry offal, butter, margarine, cheese, mixture and etc. Import duties will be reduced by 20 percent for seven years for specific products of poultry, concerning which Ukraine has significant export potential.

Industrial products

Duty-free access for: textile, products of iron and steel, equipment and spare parts for it, electrical equipment, etc.

The phased abolishment of import duties:

  • Three years for: building materials, hand tools, industrial equipment, parts of aircraft, etc.
  • Five years for: receiving, electrical equipment, ray tubes, motorcycle, trailers vehicles, cameras, etc.
  • Seven years for: cars, tractors, spare parts, etc.

Access to Canada market

All agro products, except for quoted: tariff quotas established for 22 groups of goods (wheat and barley and products of processing; milk products; poultry and poultry offal products; turkey and turkey offal products; eggs of broilers and chickens; eggs and eggs products; margarine; pork; peanut butter).

Duty-free access for all industrial products (for abolishment current rates of import duties of Canada are from 2-25 percent). The seven years transitional periods is established for gradual reduction of import duties abolishment for cars.

The signing of the Agreement on free trade between Ukraine and Canada is aimed at the deepening of trade and economic cooperation between the countries.

Arm’s Length Price for Goods Traded on World Commodity Exchanges

On September 8, 2016, the Cabinet of Ministers of Ukraine adopted Resolution № 616 “On the list of goods traded on the commodity exchanges and world commodity exchanges for establishing the conformity of controlled transactions conditions with the arm’s length principle” (Resolution).

The Resolution establishes the list of goods (description of goods, UKTZED Code, commodity exchange name) that are subject to compliance with arm’s length price in controlled transactions for the purpose of application of para. of the Tax Code of Ukraine (hereinafter – TCU).

As stated in para. of the TCU, the arm’s length price in export and import transactions with goods, traded on the commodity exchange and listed in the Resolution should be determined based on the comparable uncontrolled price (which price is determined according to the range of prices for a particular good/product, traded at a particular stock exchange with relevant adjustment made on the volume of operation, payment and delivery conditions, quality and transportation costs. The price range is computed for the decade, preceding the date of the controlled operations.

Авторы: Igor Davydenko and Tetiana Gryn (Dentons)


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