The decision by the Cabinet of Ministers of Ukraine and the possible future adoption by parliament of the bill dissolving a convention between the governments of Ukraine and Cyprus on the avoidance of double taxation and the prevention of tax evasion regarding income tax and the related protocol does not envisage a mechanism for its instant termination, according to Prime Minister Arseniy Yatseniuk.

"As part of tax fairness, we are introducing new approaches to the taxation of big business... First of all, the issue concerns an increase in tax rates on rent, gas, oil, and [gas] condensate. Secondly, this is the cancellation and dissolution of the agreement between Ukraine and Cyprus, due to which every year about UAH 6 billion was withdrawn from Ukraine without taxation. I want to stress separately that the cancellation of this agreement does not envisage the simultaneous termination of its effect, because Cyprus should also dissolve it," Yatseniuk said, while opening a government meeting on Monday.

He also said that in the case of a successful vote on the bill in parliament the Ukrainian Foreign Ministry would get the right to immediately start talks with Cyprus on this issue.

As reported, on December 17, the Cabinet of Ministers approved a draft law cancelling the convention between the governments of Ukraine and Cyprus on avoiding double taxation and preventing income tax evasion.

According to a post on the official website of the Finance Ministry of Ukraine, law No. 412-VII of July 4, 2013 ratified the said convention.

Compared to conventions signed by Ukraine with other countries, the Ukrainian-Cypriot convention contains articles which foresee beneficial taxation for certain types of income.

"According to the document, interest rates are taxed at 2% [Article 11], while in other conventions – 5-10%," the ministry said.