The Verkhovna Rada, Ukraine's parliament, has ratified a convention between the governments of Ukraine and Cyprus to avoid double taxation and prevent income tax evasion.

A total of 244 lawmakers supported the ratification of the document.

The convention was signed in Nicosia, Cyprus, on November 8, 2012.

As reported, the convention and the protocol are aimed at creating an effective bilateral legal framework to avoid double taxation and prevent income tax evasion in transactions between Ukraine and the Republic of Cyprus.

The convention will replace the current intergovernmental agreement between the governments of the former Soviet Union and Cyprus on the avoidance of double taxation of October 29, 1982.

According to the document, 5% and 15% taxes are set for dividends instead of a zero tax. 5% is paid if the recipient of the dividends holds at least 20% of the company's capital or has invested at least EUR 100,000 in the company that pays the dividends.

The revenues from shares of other shareholders are taxed at 15%.

A 2% tax will be imposed on interest rates. A 10% rate will be imposed on royalties and 5% on royalties on works, patents and trademarks.

Revenues from the sale of property are taxed according to laws of the country.

Profit on economic operations is taxed only in the country where the operations are carried out.

The current agreement with Cyprus on the avoidance of double taxation provides no tax on royalties and dividends, which is actively used by Ukrainian businessmen, while formalizing the ownership of Ukrainian assets through Cypriot companies.

According to the State Statistics Service, the residents of Cyprus are the largest investors in Ukraine: $14.52 billion as of July 1, 2012, or 27.7% of total foreign direct investment in the country. They are followed by German companies: $7.4 billion, or 14.1%.