News (#10 October 2017)

Law digest

Parliament adopts changes in taxation of foreign investors income

The Supreme Council of Ukraine has adopted Draft Law No.7052 On Amendments to the Tax Code of Ukraine Related to Taxation of Income of Non-Residents Investing in Securities in its first and final readings.

Thus, the purpose of amending certain provisions of the Tax Code is the need to resolve the issue and to remove discrepancies in text regarding exemption from taxation of foreign investors’ income received from transactions with Government and local loan bonds, and also of income arising under loans guaranteed by the Government or relevant local councils.

In particular, the adoption of the Law will make it possible to exempt from taxation the following types of income of a non-resident:

— income of a foreign investor from Government securities and local loan bonds paid out by the central executive authority that ensures the formation and implementation of state financial policy or by their issuer;

— income of a foreign investor from transactions with debt securities, fulfillment of obligations under which is ensured by state or local guarantees, if such income is paid out by the respective guarantor.

 

List of stock exchanges for preferential taxation of non-residents’ income approved

By its Resolution No.675 of 6 September 2017, which came into force on 9 September, the Cabinet of Ministers approved the list of foreign stock exchanges to regulate taxation of income of non-residents that place debt securities on these stock exchanges and receive income from granting loans to residents.

The list includes: Athens Stock Exchange (ATHEX) (Greece), Australian Securities Exchange (Australia), BME Spanish Exchanges (Spain), Borsa Istanbul (Turkey), Deutsche Brse AG (Germany), Euronext (EU), Hong Kong Exchanges and Clearing (Hong Kong), Irish Stock Exchange (Ireland), Japan Exchange Group, Inc. (Japan), Korea Exchange (Korea), London Stock Exchange (Great Britain), Luxembourg Stock Exchange (Luxembourg), Nasdaq (USA), NYSE (USA), NZX Limited (New Zealand), Oslo Bors (Norway), Singapore Exchange (Singapore), SIX Swiss Exchange (Switzerland), Tel Aviv Stock Exchange (Israel), TMX Group Inc. (Canada), Warsaw Stock Exchange (Poland).

Thus, the income of non-residents in the form of interest on a loan granted to residents shall be taxed at a rate of 5% if funds for such a loan were attracted by placing foreign debt securities on a foreign stock exchange included in the mentioned list.

The National Securities and Stock Market Commission recommends using efforts to update and renew the list of stock exchanges taking into account the development of the international capital market.

 

Conditions for applying enforcement actions to banks changed

By its Resolution No.84 of 31 August 2017 the National Bank of Ukraine has established exceptions to conditions for introduction by NBU of a special regime for monitoring activities and appointing the supervisor for a bank, which was granted a loan to maintain its liquidity. Thus, from now on, the basis for introduction of a special regime for monitoring activities and appointing a supervisor shall no longer be the fact that such bank received a loan from the NBU to maintain its liquidity in accordance with standard instruments for regulating banking system liquidity or the fact of existence of such loan at a bank.

Equal conditions for charging fines for violating the requirements of legislation on financial monitoring by banks were also introduced. While earlier such fines were calculated as a percentage of the registered authorized capital of a bank, now they are determined within the established fine limit for the corresponding type of violation of requirements of legislation on financial monitoring.

 

New opportunities for mobile operators to respond to abuses by subscribers

The Government has responded to common cases of interference by unauthorized subscribers in the operations of telecommunication networks and has taken measures to protect the interests of mobile operators. These innovations are stipulated by the Resolution of the Cabinet of Ministers
On Amendments to the Rules for Provision and Receipt of Telecommunication Services, Procedure for Operators to Respond to Illegal Actions of Subscribers, No. 703 of 20 September 2017.

Thus, earlier, in order to prevent subscribers’ violations of traffic routing, mobile operators were forced to block mobile numbers. This sometimes objectively violated the rights of the owners of numbers, because operators could not later prove to the
NCCIR the sufficiency of grounds for taking such measures.

To solve this problem, the following changes were approved: i) terminology was updated; ii) obligation to inform subscribers about the reasons for limitation or termination of services with indication of terms and conditions for their renewal is set; iii) rule on mandatory recording of the facts of violation by drawing up relevant acts in paper or electronic form by the operator is set.

Moreover, the operator has the right to limit or terminate the provision of services only in cases stipulated in legislation, and for renewal of access to the service it cannot demand payment from a subscriber.

 

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