Ukraine has formed the legal basis for most of the steps of the BEPS Action Plan. This was announced by the Head of the State Tax Service of Ukraine Oleksii Lyubchenko during the international online conference "Implementation of the BEPS plan in Ukraine", which began its work on September 24.
The conference, initiated by the State Tax Service, was also attended by Deputy Minister of Finance of Ukraine Svitlana Vorobey, representatives of the Ministry of Finance, Ministry of Foreign Affairs of Ukraine, foreign tax authorities (Poland, Lithuania, Great Britain, Sweden, Cyprus, Finland), Organization of Economic Cooperation and Development (OECD), the U.S. Treasury’s Office of Technical Assistance, the German Society for International Cooperation (GIZ), the Intra-European Organization of Tax Administrations (IOTA), the International Monetary Fund, the National University of the State Tax Service of Ukraine, leading audit companies, MPs of Ukraine.
Deputy Minister of Finance of Ukraine Svitlana Vorobey noted that considerable attention is paid to the effective and consistent work on the implementation of the steps of the BEPS (Base Erosion and Profit Shifting) plan in Ukraine. And in this direction, the Ministry of Finance of Ukraine fruitfully cooperates with the tax service and international experts.
According to the Chairman of the State Tax Service, due to gaps and inconsistencies in national and international tax legislation, international companies may reduce or avoid income tax liabilities. And the situation when states lose budget revenues is no exception for Ukraine.
"Over the past 3 years, only passive income from Ukraine makes up USD 22.4 billion. Every year, more than 2,000 payers declare controlled transactions to the tune of USD 90 billion. These amounts are significant for the economy of Ukraine and need appropriate control," Oleksii Liubchenko stressed.
By joining the Organization for Economic Co-operation and Development (OECD) Enhanced Co-operation Program in 2017, Ukraine committed itself to implementing the BEPS Action Plan Minimum Standard (base erosion and profit shifting).
"If the Minimum Standard included the mandatory implementation of 4 steps out of 15 according to the Plan, now Ukraine has implemented the legal basis for most of the steps of the Plan," said Oleksii Liubchenko.
In particular, this applies to the implementation of the following steps of the Plan:
disclosure by individuals resident in Ukraine of their participation in foreign companies they control (CFC) and the rules of taxation of such companies;
limiting the expenditures for financial transactions with related parties;
combating tax abuses related to the use of special tax regimes;
prevention of abuse in connection with the application of double taxation treaties;
prevention of artificial avoidance of recognition of the status of permanent representation office;
improving control over transfer pricing;
reporting rules by country for international groups of companies;
conflict resolution mechanism;
introduction of a multilateral instrument - MLI (Multilateral Instrument).
The Chairman of the State Tax Service stressed that Law № 466, which entered into force on May 23, 2020, introduces a number of fundamental changes aimed at combating tax erosion and tax evasion, increasing tax transparency, ensuring tax compliance and improving tax administration, formal introduction of the principle of "predominance of substance over form" and other important rules of anti-tax avoidance, which will bring the Ukrainian tax system closer to OECD standards.
"Such intensive changes in national legislation give a clear signal to Ukrainian business and Ukrainian beneficiaries of foreign companies to move on to more transparent rules and the need to revise their business models," said Oleksii Liubchenko.