The Ukrainian Parliament has amended the Corporate Income Tax (CIT) Law regarding the taxation of dividends. These amendments are favourable for taxpayers and are aimed at solving certain long-standing problems that were faced, particularly, by Ukrainian holding companies.

In particular, the amendments:

  • abolish taxation of dividends at the level of Ukrainian holding companies on dividends distributed by their controlled foreign subsidiaries (except for subsidiaries in off-shore jurisdictions). A foreign subsidiary qualifies as controlled if a Ukrainian holding company holds directly or indirectly the major stake or controls the majority of votes in the board or holds at least 20 per cent of the shares in the charter capital of such subsidiary. To compare, the previous version of the CIT Law provided that dividends received by a Ukrainian holding company from non-resident subsidiaries were taxable, whilst any dividends received from a Ukrainian source were exempt.
  • release Ukrainian holding companies from an obligation to pay an advance CIT on distributions of dividends in the amount corresponding to the amount of dividends received from its controlled subsidiaries. According to the previous version of the CIT Law, Ukrainian holding companies were relieved from the advance CIT only when their income derived mainly from dividends (at least 90%) received from controlled subsidiaries. By way of a reminder, a tax payer must pay an advance CIT to the treasury before or simultaneously with the distribution of dividends in an amount of 25% of the gross amount of dividends on top of such dividends. Failure to comply with this requirement may result in a fine equal to 200% of the paid out dividends.

The amendments to CIT Law became effective on 19 May, 2010.

Law On amendments to CIT Law regarding taxation of dividends, No. 2156-VI, dated 27 April, 2010.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 08/06/2010.