The list of offshore jurisdictions expands significantly
The matter of amendments
The Ukrainian Government has updated the list of so called “offshore” jurisdictions
The new “List of states (territories) that fall within the criteria set forth in sub-clause 18.104.22.168 of sub-clause 39.2.1 of clause 39.2 of Article 39 of the Tax Code of Ukraine” was adopted by the Ukrainian Government via the regulation of the Cabinet of Ministers of Ukraine No. 1045 dated 27 December 2017.
The said regulation enters into force on 01 January 2018.
Whom it will affect
Ukrainian businesses making transactions with companies that are registered in, or are residents of, jurisdictions included in the List.
The new List of so called “offshore” jurisdictions features 85 states (territories). Compared to the previous list, the new one features 19 additional jurisdictions, among which are Hungary, Latvia, Estonia, UAE, and Singapore.
Transactions with a counterparty that is registered in, or is a resident of, such a jurisdiction are considered ‘controlled transactions’ subject to the transfer pricing rules, if the annual income of the Ukrainian counterparty exceeds UAH 150 million (approx. EUR 4,5 million) and the annual turnover within the transactions between the Ukrainian side and the “offshore” counterparty exceeds UAH 10 million (approx. EUR 0,3 million). If the said limits are not reached, but the Ukrainian business accrues royalties in favor of counterparties from such jurisdictions or purchases goods and services from them, such transactions may trigger tax adjustments.
Using companies, that are residents of the relevant jurisdictions, for the purposes of issuing debt securities on a foreign stock exchange to raise financing and extend a loan to a Ukrainian business may deny the Ukrainian side the preferential regime established by the Tax Code of Ukraine for the taxation of interest payments to non-residents (this involves, first of all, such jurisdictions as Ireland, Singapore and Hong Kong).