​Ukraine has signed the Multilateral Convention MLI

On July 23 in London, acting Minister of Finance of Ukraine Oksana Markarova signed Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention MLI).

What’s it about?

Gaps and discrepancies in the national and international tax regulations make it easy for international companies reduce or evade the corporate profit tax. This results in tax revenue losses for the state budget of Ukraine. To prevent it, Ukraine joined the Extended Cooperation Program as part of the OECD initiative on January 1, 2017.

The member states of the OECD adopted a joint action plan to tackle base erosion and profit shifting (BEPS).

The BEPS action plan includes 15 actions covering various areas where aggressive tax planning shall be tackled. Mandatory for Ukraine are four actions (minimum standard of the BEPS plan):
- action 5: “Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance”;
- action 6: “Preventing the Granting of Treaty Benefits in Inappropriate Circumstances”;
- action 13: “Transfer Pricing Documentation and Country-by-Country Reporting”;
- action 14: “Making Dispute Resolution Mechanisms More Effective”.

The revision of conventions with each participating country in a separate procedure, the further signing of the protocols and their ratification by the parliaments pose a very complicated and time-consuming process which can take years. That is why, action 15 of the BEPS plan was agreed which requires the signing of the MLI.

Signing and ratifying the MLI Convention, Ukraine becomes entitled to make simultaneous amendments to all or selected conventions on the avoidance of double taxation. Thus, the signing and ratification of the MLI Convention means that Ukraine fulfills actions 6 and 14 of the BEPS Plan in one go.

What’s the benefit?

“The implementation of the BEPS Action Plan will help coordinate the international tax regulations with more than 70 countries and create a more transparent tax environment. By signing the MLI Convention, we will be able to make necessary amendments to our existing international agreements on double taxation between Ukraine and other countries”, acting Minister of Finance of Ukraine Oksana Markarova said during the signing ceremony.

What comes next?

The multilateral MLI Convention shall be ratified by the Parliament.

This Convention will make it possible to reduce the shifting of capital from Ukraine to tax havens aiming to minimize due taxes. This will contribute to the increase of the tax revenues in Ukraine.