On the 11^th of December 2015, Cyprus and Ukraine signed a Protocol in Kiev, which amends the Double Tax Treaty (DTT) between the two countries. The ratification procedures by the two countries are expected to be completed soon and the signed Protocol will become effective on the 1^st January 2019, on the date when the existing Convention will expire. The Existing Convention was signed on the 8^th of November 2012 and entered into force on the 1^st of January 2014. 
 
The new Protocol is based on the OECD Model Tax Convention for the Avoidance of Double Taxation on Income and on Capital. The Protocol contains the “most favoured nation” clause which provides that the DTT between Cyprus and Ukraine will need to be amended where Ukraine signs a DTT with another country that includes more favourable conditions than those provided to Cyprus regarding dividends, interests, royalties and capital gains
 
Amendments to the Double Tax Treaty
 
Dividends
 
Under the current DTT, the withholding tax rate on dividends paid to Cypriot shareholders by Ukrainian Companies is 15%.
 
This percentage can be reduced to 5% if:
- More than 20% of the share capital of the company paying the dividend is owned by the beneficial owner or
- The beneficial owner has invested more than €100, 000  

After the Protocol:
- More than 20% of the share capital of the company paying the dividend is owned by the beneficial owner and
- The beneficial owner has invested more than €100, 000  

Interest
 
The current DTT provides for withholding tax of 2% on interest paid by a Ukrainian debtor to a beneficial owner in Cyprus.
 
When the Protocol enters into force, the rate will increase to 5%.  
 
Capital Gains
 
Under the current DTT, the capital gains arising from movable property including shares in “property-rich” companies are subject to taxation only in the country of which the seller is resident.
 
When the Protocol takes effect, gains on shares of “property rich companies” will both be taxable in the country of which the seller is resident as well as in the country in which the immovable property is located.