REUTERS
The Verkhovna Rada on Friday adopted a law on amending the Tax Code of Ukraine concerning the taxation of income earned by non-residents from bonds (No. 2931).
As noted in the law's explanatory note, since January 1, 2015, income of non-residents in the form of interest on government securities has been taxed at the standard rate of 15% of the amount payable to the budget when making a payment.
At this, with regard to international treaties for the avoidance of double taxation that Ukraine has signed with the countries of residence of the persons in favor of whom payments are made, such income is generally not taxed.
To ensure the implementation of laws on state budget and decisions of local budget of Ukraine for the relevant years in the part related to their funding by means of internal and external sources, as well as the attraction by business entities that are residents of Ukraine of loans under state (local) guarantees for investment and other development projects, it is necessary to create an appropriate legislative framework for tax exemption of investors’ income received from transactions with state and local securities and income earned on borrowings guaranteed by the state or relevant local council, according to the bill.
Such taxation rules had been applied in Ukraine for the last 15 years (as in most countries of the world) until the introduction of changes to the Tax Code that came into effect on January 1, 2015.
The reaction of investors (creditors) to such changes to the Tax Code was negative and significantly affected their decisions regarding the purchase of Ukrainian securities, investment in the Ukrainian economy, and only resulted in an increase in the cost of borrowing.
Therefore, amendments to the Tax Code are aimed at exempting from taxation of income of foreign investors derived from transactions with state and local securities and income earned on borrowings guaranteed by the state or the relevant local council.