Ukraine in talks with Latvia, Estonia on inclusion of these countries in list of offshore zones
Ukraine is holding negotiations at the level of embassies and finance ministries due to the decision by the Ukrainian government to include Estonia and Latvia in the list of offshore zones, Ukrainian Finance Minister Oleksandr Danyliuk has said.
"Yes, such a decision was made, and we already had a conversation with the ambassadors of Estonia and Latvia. This is due to the fact that the mechanism for taxing profit on withdrawn capital was introduced in these two countries - in Estonia for several years already, and in Latvia since January 1 this year. It means that profit is not taxed until it is distributed in the form of dividends, for example, but we have legislative requirements... There is some conflict with the law, but this is not a conflict with friendly states," he said, while answering in parliament a question from People's Front MP Oleksandr Kodola.
He noted that the Finance Ministry was working to resolve this issue given that Ukraine intends to launch a model of tax on withdrawn capital in 2019.
"We are in contact with both the embassies and the finance ministries of these countries," he said.
"Work is being conducted at the level of the embassies and finance ministers of these countries," First Deputy Prime Minister and Minister for Economic Development and Trade Stepan Kubiv said.
As reported, in late 2017, the Ukrainian government included Estonia, Latvia, Iran, Cuba, Laos, Lebanon, Malta, Morocco, Monaco, the UAE, Singapore, Georgia and Hungary in the list of countries the list of countries whose transactions with contractors are subject to control under the Transfer Pricing Law. The list also included Guadeloupe, Guatemala, French Guiana, the Commonwealth of Dominica, the Dominican Republic, Mauritius, and the Independent State of Samoa. The total number of the countries for the monitoring increased from 65 to 85.
According to Estonian Ambassador to Ukraine Gert Antsu, the official reason for including Estonia in the list is that Ukraine is considering the Estonian profit tax rate as zero rate because of the exemption of reinvested profit from taxes (according to the Estonian tax on withdrawn capital). At the same time, profit is taxed in Estonia with the withdrawal of dividends, and the system does not allow avoiding taxation.
"Therefore, we believe that we were included in the list by mistake," he said.
Antsu noted that the decision concerns all entrepreneurs engaged in exports to Ukraine. In 2016, there were 402 such firms.