OREANDA-NEWS. July 30, 2013. The Parliament of Ukraine ratified the Convention between the Government of Ukraine and the Government of the Republic of Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income.

Generally, the new tax treaty follows the principles of the OECD Model Tax Convention on Income and Capital. Compared to the currently effective 1982 Convention between the Government of the Republic of Cyprus and the Government of the USSR for the Avoidance of Double Taxation of Income and Property.

Unlike most of other tax treaties of Ukraine, new tax treaty exempts from the withholding tax any profits derived from the sale of shares of real estate based companies, which presents an attractive tax planning opportunity.

New tax treaty introduces a mechanism for the exchange of information between the competent authorities of the Contracting States. The new mechanism may be viewed as having an overarching effect as it extends not only to direct taxes but to any taxes established by domestic law of Contracting States. In other worlds, with the introduction of this mechanism the competent authorities, defined as such for the purposes of the Tax Treaty, would acquire a forceful instrument for gathering tax-related information with the view to capturing untaxed revenues.

New tax treaty is scheduled to enter into force once Ukraine and Cyprus notify each other on the completion of the relevant procedures required by their respective domestic laws. Given that the 1982 Convention would automatically terminate when new tax treaty enters into force.