CPT Provisions Of The New Tax Code That May Affect Cross Border Structuring

The Ukrainian Parliament has adopted the new Tax Code of Ukraine (Tax Code) which became effective on 01 January 2011 (however the corporate profit tax (CPT) section will come into force on 01 April 2011). 

In this alert we focus on certain CPT provisions of the Tax Code that may affect cross border transactions between Ukrainian and foreign businesses.

As a general comment, although the Tax Code sets a lower CPT rate of 23% (as opposed to the current rate of 25%) which is subject to a further annual gradual decrease to 16% by 2014, the tax burden for Ukrainian companies doing business with non-residents may in fact increase.  Below we outline CPT related provisions that may have an adverse tax effect on tax structuring tools commonly used for cross border transactions.