International conference “Implementation of the BEPS Plan in Ukraine” has started

Legal basis for most steps of the BEPS Action Plan has been formed in Ukraine. This was reported by Chairman of the State Tax Service of Ukraine Oleksiy Lyubchenko during the international online conference “Implementation of the BEPS plan in Ukraine” which started on the 24^th of September 2020.

At the initiative of the State Tax Service of Ukraine, the international conference was attended by the Deputy Minister of Finance of Ukraine Svitlana Vorobei, representatives of Ministry of Finance of Ukraine, Ministry of Foreign Affairs, tax authorities of foreign states (Poland, Lithuania, Great Britain, Sweden, Cyprus, Finland), Organization for Economic Co-operation and Development (OECD), the US Treasury Technical Assistance Office Department German Society for International Cooperation (GIZ), Intra-European Organization of Tax Administrations (IOTA), International Monetary Fund, National University of the State Tax Service of Ukraine, leading audit companies and people’s deputies of Ukraine.

Deputy Minister of Finance of Ukraine Svitlana Vorobei noted that considerable attention is paid to effective and consistent work on the implementation of steps of the BEPS plan in Ukraine. And in this direction the Ministry of Finance of Ukraine productively cooperates with the Tax Service and international experts.

According to Chairman of the STS, due to gaps and inconsistencies in national and international tax legislation, international companies may reduce or avoid income tax liabilities. As follows, a situation when states lose budgetary revenues is not an exception for Ukraine.

“22.4 billion USD is a passive income from Ukraine over the past 3 years. Every year more than 2 thousand payers declare controlled operations for 90 billion USD. These amounts are significant for Ukrainian economy and require appropriate control” – emphasized Oleksiy Lyubchenko.

By joining the Organization for Economic Co-operation and Development (OECD) Enhanced Co-operation Program in 2017, Ukraine has committed itself to implementing the “Minimum Standard” of the BEPS (Base Erosion and Profit Shifting) Action Plan, eroding the tax base and withdrawing profits from taxation.

“If the Minimum Standard included mandatory implementation of 4 steps out of 15 according to the Plan, now the legal basis for most steps of the Plan has been implemented in Ukraine.” – stated Oleksiy Lyubchenko.

Specifically, this applies to implementation of the following steps of the Plan:

- disclosure of Ukrainian individuals – residents’ participation in foreign companies they control (CIC) and taxation rules of such companies;

- limiting the cost of financial operations 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 permanent representation status;

- improving control over the transfer pricing;

- reporting rules by country for international groups of companies;

- conflict resolution mechanism;

- introduction of a multilateral instrument – the MLI (Multilateral Instrument).

Chairman of the STS outlined that the Law of Ukraine № 466, which came into force on the 23^rd of May 2020, introduces a number of fundamental changes aimed at combating tax erosion and tax evasion, increasing tax transparency, compliance with tax rules and improving tax administration, formal introduction of the “predominance of substance over form” principle and other important anti-tax rules that will bring Ukrainian tax system closer to the 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.” – emphasized Oleksiy Lyubchenko. 

Reference.

BEPS Action Plan (Base Erosion and Profit Shifting) is a project of the Organization for Economic Cooperation and Development (OECD) / “Group of Twenty” to address problems of erosion (understatement) of the tax base and income transfer, which was presented by the OECD and approved in September 2013 at the G20 Summit. This Plan contains 15 steps, the development of which will result in the provision of domestic and international instruments, through which tax rights will be brought into the line with economic activities of international corporations.