We would like to inform of important legislative developments concerning the applicability of international double taxation treaties in the context of the implementation of the Base Erosion and Profit Shifting (BEPS) standards in Ukraine, as well as the continued validity of certain international tax conventions on the avoidance of double taxation. Hope this information provides useful practical insight and helps avoid errors in connection with the recent legislative changes.
On 7 June 2025, the Law of Ukraine No. 4278-IX of 27 February 2025 “On Amendments to Article 1 of the Law of Ukraine ‘On the Ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting’” entered into force. This Law updated the list of international double taxation treaties that are subject to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Multilateral Instrument, or MLI).
This marked the final stage of a large-scale initiative launched in 2024 aimed at implementing the BEPS standards designed by the Organisation for Economic Co-operation and Development (OECD) to combat base erosion and profit shifting.
As part of this initiative, Ukraine terminated the operation of the following international double taxation treaties:
- The Convention between the Government of Ukraine and the Government of the Russian Federation on the Avoidance of Double Taxation;
- The Convention between the Government of Ukraine and the Government of the Republic of Belarus on the Avoidance of Double Taxation;
- The Convention between the Government of Ukraine and the Government of the Syrian Arab Republic on the Avoidance of Double Taxation;
- The Convention between the Government of Ukraine and the Government of the Republic of Cuba on the Avoidance of Double Taxation.
This decision is justified both from a political standpoint and by the need to counteract abuses by states that fail to ensure adequate levels of tax transparency or do not cooperate in the exchange of tax information.
At the same time, Ukraine updated existing or concluded new double taxation treaties with jurisdictions adhering to modern international standards of transparency and fair taxation. These jurisdictions include: Austria, the Kingdom of Denmark, the Kingdom of the Netherlands, the United Kingdom of Great Britain and Northern Ireland, the Swiss Confederation, the Republic of Singapore, the United Arab Emirates, Malaysia (new treaty), and Qatar.
These updated agreements introduce effective provisions consistent with BEPS standards, including:
- enhanced mechanisms to prevent tax avoidance;
- improved procedures for transparent exchange of tax information;
- implementation of the Principal Purpose Test (PPT) and other instruments established under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the Multilateral Instrument, or MLI).
For businesses, investors, and individuals conducting or planning to develop international commercial or investment projects between Ukraine and other countries with which double taxation treaties have been concluded, these changes are of fundamental importance. Several double taxation conventions (treaties or agreements) have been modified by the provisions of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).
Accordingly, in the context of Ukraine’s full implementation of BEPS standards, the application of provisions of the relevant bilateral tax conventions is now subject to more stringent legal frameworks. In particular, the Ukrainian tax authorities now have the right to:
- verify the actual economic substance of transactions;
- apply the Principal Purpose Test (PPT);
- require proof that the terms of transactions comply with the arm’s length principle.
In this regard, taxpayers should carefully and properly structure their cross-border transactions, ensuring legal and economic justification for each transaction in accordance with the principles embedded in the double taxation treaties, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), as well as the relevant provisions of the Tax Code of Ukraine.
Hope this information will be useful to you. Please note that it is of a preliminary nature and does not disclose all possible legal aspects and risks, which may be analyzed and presented in a separate extended consultation. Do not hesitate to contact us should you have any questions or require additional information or assistance.
Author: Dmytro Dovzhyk, Attorney-at-law and Partner at ArtesLex
25 July 2025
Comments are closed for this post.