Ukraine, Germany sign new double taxation avoidance agreement

MOSCOW. May 20 (Interfax) - Ukrainian Finance Minister Sergei Marchenko and German Vice Chancellor and Finance Minister Lars Klingbeil signed an intergovernmental agreement on double taxation avoidance at a meeting in Paris, Ukrainian media reported.

Charge d'Affaires at interim of the German embassy in Paris Gudrun Lingner also signed the agreement on behalf of Germany, media outlets reported, citing a statement from the Ukrainian Finance Ministry's press service.

The new document will replace the two countries' July 3, 1995 agreement, the statement said. The new agreement updates taxation approaches in accordance with Organization of Economic Cooperation and Development standards and changes tax rates on passive income in the source state. In particular, the 5% rate is retained for dividends received by companies owning at least 20% of the dividend payer's capital. However, the rate has been raised from 10% to 15% in other cases of dividend payment.

The interest income tax rate has been raised from 2% to 5% for interest paid on credit sales and on loans provided by banks and financial institutions. The new agreement also abolishes the zero tax rate for certain types of royalties and sets the general rate at 5%.

The document also contains provisions on prevention of tax benefit abuse, on expanding tax information exchanges between the countries, and on dispute settlement mechanisms to protect taxpayers' rights, the ministry said.