Ministry of Finance: Government approved draft law on ratification of the Convention with Australia on the elimination of double taxation

The Convention between Ukraine and Australia shall enable the elimination of double taxation, make tax rules more predictable for businesses, and promote the development of bilateral economic cooperation.

The Cabinet of Ministers of Ukraine has approved the draft Law of Ukraine “On the Ratification of the Convention between the Government of Ukraine and the Government of Australia for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance, and the Protocol thereto.” The Government also adopted a draft order on submitting the document for ratification by the Verkhovna Rada of Ukraine. The documents were drafted by the Ministry of Finance of Ukraine.

The Convention establishes rules for the allocation of taxation rights between Ukraine and Australia regarding income received by residents of one state from sources in the other state.

It also provides for the establishment of tax rate limits, specifically:

• dividends — 5% (provided that at least 10% of the company’s capital is held);
• interest — 5% for financial institutions and 10% in other cases;
• royalties — 10%.

In addition, the Convention provides for:

• mechanisms for the elimination of double taxation;
• the exchange of tax information between the competent authorities of both states;
• a mutual agreement procedure for resolving potential tax disputes.

Once the draft law is adopted by the Verkhovna Rada of Ukraine and the necessary domestic procedures are completed by both parties, as well as the exchange of official notifications, the Convention and its Protocol will enter into force.

It is expected that the implementation of the Convention shall contribute to improving the investment climate, increasing the transparency of tax relations, and intensifying trade and economic cooperation between Ukraine and Australia.