Ukraine and Malta intend to sign the Convention for the avoidance of double taxation and prevention of tax evasion.
The decision on the signing such a convention was approved by the Cabinet of Ministers of Ukraine dated 24 July 2013.
The draft convention on tax rates on dividends, interest and royalties is consistent with the standards set forth in the Model Convention on income and capital. Dividends will be taxed at the standard rate of 15 %, coupled with the fact that dividends, which receives the owner more than 20% of the companies, will be subject to levy tax in the amount of 5 %. Standard rate tax on interest and royalties is 10 %.
Quite recently, Malta signed up double tax agreements with Ukraine and Russia. These double taxation regulations were a part of economic stability and financial growth. Entry into these double taxation agreements are forced to go through serious internal ratification formalities. The internal ratification procedures depend on the countries being involved. A lot of people have serious confusions regarding the double taxation rules between Malta and Ukraine. If you are pondering over this agreement, look no further. Here is a quick walk through the double taxation agreements.
The Two Figures
By default, double tax agreements were the first of its kind between Ukraine and Malta. The two countries have not established any bonds or signed deals beforehand. The double tax agreement lets investors to withhold tax on dividends, which are supposed to be levied from a specific source. However, the tax should not cross certain margins:
1) The withholding tax must not be more than 5% on dividends that are paid to a specific company (excludes partnership). These dividends should hold at least 20% of the distributing company’s capital.
2) Everywhere else, the withholding tax should be within 15%!
The withholding tax is levied at a base rate of 10% when it comes to royalty income and interest. According to the Malta and Ukraine double tax agreement, royalty doesn’t cover payments for the right use of scientific equipment, industrial equipment or operating lease payments.
From A Different View
If you look at the double taxation rules from Maltese perspective, you will see a different picture. No withholding tax or statutory conditions would be imposed on the dividends paid by Malta to Ukrainian or Russia. Above all, withholding tax is not levied in the country upon royalties or the payment of interest. These are fundamental features alias conditions to be satisfied! Hence, the permanent establishment must not be connected with non-resident ventures.
The Capital Gains
When it comes to capital gains, the double taxation agreement provides that the source may obtain tax gains from other state residents. The tax gains are effective when the rights derived or the shares transferred are more than 50% the value (direct or indirect) from the immovable property in the source location.
On the whole, double taxation agreements between Ukraine and Malta have benefits and limitations. One should identify what is good for their trade before making a financial decision.