Ukraine starting to terminate agreement with Russia on avoiding double taxation - Finance Ministry

KYIV. May 4 (Interfax-Ukraine) - The Ukrainian government has adopted a decision approving a bill to terminate the February 8, 1995, Ukraine-Russian agreement on avoiding double taxation of incomes and assets and on preventing tax evasion.

The agreement was ratified by the Ukrainian Verkhovna Rada on October 6, 1995.

The goal of terminating this document is to "protect the national interests and the national security of Ukraine," the Ukrainian Finance Ministry said in a statement.

Once the agreement is terminated, Russian residents running businesses in Ukraine will no longer be entitled to preferential tax terms, the Finance Ministry said.

"After the agreement is terminated, the general tax rate of 15%, established by the Tax Code of Ukraine, will be applied to all incomes earned in Ukraine by residents of the Russian Federation instead of the reduced rate set by the agreement: 5% on dividends, 10% or 0% on interest, and 10% on royalty," it said.

The agreement also allows Ukrainian residents working in Russia to pay taxes in Russia and not to pay them in Ukraine, the ministry said, adding that they will no longer have this opportunity after the document ceases to be in effect.

Furthermore, this step will mean that Ukraine no longer has to abide by its commitments to exchange tax-related information with Russia.