#03 March 2015

In focus – International Tax

The design of the tax systemand its cross-borderimplications are questionsof ever increasing concernfor business and businessdecision-makers. No wonder, each timethe very latest tax reform in Ukrainechallenges the issue of corporate taxavoidance on the political agenda.The unfriendly investment climate ensuresour country is considered as a taxregime that facilitates tax avoidance.While facing continuous tax pressure domestically, thorough multijurisdictional corporate structuring by majorbusiness groups is primarily the smartsolution

With the support of Tax Regulation

The previous version of Article 39 ofthe Tax Code of Ukraine (hereinafter TCU)contained aconcise definition of transactionsthat are considered controlled for thepurpose of transfer pricing control. Thoseincluded business purchases (sales) ofgoods (works, services). All explanations oncertain situations explained transactionsin more or less detail and were provided inthe Summarized tax advice of 1 July 2014No.368

Expert Opinion

Tax Information Exchange Developments

Pavlo V. Khodakovskyy, Ganna S. Demchenko

In recent years international exchange of information for tax purposes has become an important issue considered by major players on the international tax policy arena.

The ubiquitous globalization of almost all the processes in the world literally erased boundaries for business, which became mobile and so possesses plenty of tools for tax planning, sometimes aggressive, as well as tax evasion and tax fraud. On the other hand, tax and controlling bodies remain locally attached and, thus, limited in their powers. Therefore, international exchange of information becomes a crucial issue to ensure tax compliance of business, as well as protection of each of the interested jurisdictions rights to tax earnings...

In Re

Taxation of Cross-Border Royalty Payments

Viktoriia Y. Fomenko

The increasing importance of intellectual property rights and the licensing of technology in modern business raise potential cross-border tax questions as well as tax planning opportunities for multinational groups. For example, multinational groups involved in technological, scientific and pharmaceutical businesses may seek to generate licensing income from such rights in low-tax jurisdictions to minimize tax burden.

Properly characterizing licensing income in cross-border transactions is necessary for determining the appropriate taxation of such licensing income. In general royalty income is treated differently from income derived from sales, so thorough analysis is needed to determine whether or not each particular payment is classified as a royalty...

Server in Ukraine as a Permanent Establishment

Vasyl V. Mishchenko

The most significant amendments introduced to tax legislation by the On Amendments to the Tax Code of Ukraine and certain Legislative Acts of Ukraine regarding the Tax Reform Act of Ukraine of 28 December 2014 No.71-VIII (the Act) has put into the shade those, which seemed of small importance at first glance. One of such amendments relates to the definition of permanent establishment (the PE) provided by the Tax Code of Ukraine. The Act, in particular, has widened the list of fixed places, which may be considered to constitute the PE, to include a server...

Cover Story

Quo Vadis?

With the ongoing economic turmoil in our country transactional activity is very poor. Many deals were aborted or kept on hold for better market conditions. Russian investors, who came or planned to settle in Ukraine, had to review their strategies. And the annexation of Crimea provoked an unprecedented situation for lawyers and clients on all sides. Oleh Malskyy, partner and head of corporate and M&A of AstapovLawyers International Law Group, says that internal regulation should be ultimately simple. Quo vadis? This simple question does not have a definite answer at the moment.

Global Legal Update

International Tax Update

Roustam R. Vakhitov, Dmitry A. Mikhailenko

The year 2014 broughtmany changes to tax legislationand the tax practicesof many countries.Below we summarize themost important, in our opinion,changes that are relevant to ourreaders, with the emphasis on themost interesting trends and changesin the world of taxation.

European Union

VAT: From 1 January 2015 thenew rules for cross-border VATcharges are being put in force. Thechanges apply to the supply of:

Telecommunications (SMS /telephone / Internet, etc.);

Broadcasting (TV and radio);

Electronic services (softwaredownload, cloud business, onlinegames, certain online educationservices, online payments, etc.)


Looking for Ways Out

The Legal Banking Forum, which was held by Yuridicheskaya Practika Publishing and supported by Independent Association of the Banks of Ukraine on 26 February 2015 in Kiev, became a unique platform for dialogue between the state and leading banks in Ukraine, at which the best ways of reforming banking legislation were discussed. The audience exchanged the latest views on present market conditions, inner issues of the banking activity, insolvency of banks and their liquidation, problems of banking assets, credit disputes, bankruptcy of debtors and international finance...


The Age of Commotion

The turbulence within the Ukrainian banking system and policy of the National Bank of Ukraine are at the epicenter of public attention. Almost like in 2008, the banks and their clients have become hostages of imbalanced credit policies and insufficient risk analysis. Clearance of the sector and unconventional consolidation is already on its way.

On the other side, the dramatic depreciation of the national currency, almost absent international funding, entailed local and cross-border restructuring of debts. It raises many issues regarding lenders rights protection when the currency control measures hinder their confidence and secured assets are located in the annexed Crimean peninsula or Anti-terrorist operation zone...



-VKP advised on sale of JSC LIEPĀJAS METALURGS

-Sayenko Kharenko advised ING Bank

-Asters advised Ardis Group

-Gide acted as a Ukrainian law advisor to ABF

-Asters advised FIM Bank



-1 + 1 loses a case to New Channel

-Naftogaz wins UAH 780 million from JSC Azot



-More grounds for review of judicial decisions

-New Draft Act on Insurance

-Mandatory publication of AMCU decisions

Law Digest


-Deregulation of business

-Currency restrictions

Chamber News


-Deregulation suggestions from business

-Swift reforms will retain investments

UBA News

Legal Market in the New Realities

The I UBA Annual Legal Forum Development of Legal Services Market in Ukraine was held on 27 February 2015. The accent of the large-scale discussion on promotion of legal services and effective cooperation between legal practitioners and their clients was displaced to a considerable degree by inside processes in law firms. Obviously, the latest political and economic developments have made a substantial effect on the legal market. On the one hand, the legal market has entered an era of reforms in the judicial system and advocacy, on the other — law firms are forced to operate under the crisis conditions...



3G licensing tender winners

-Fitch lowers Ukraines foreign currency rating to CC

-Samsung to Acquire LoopPay

-Violation of legislation by Energoatom

-Violation of legislation by the National Cancer Institute

-Multibillion-dollar IT deal between Deutsche Bank and Hewlett-Packard

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