The Concept of Beneficial Owner in Application of the Ukrainian Double Taxation Treaties

• Author: Leonid Tymchenko, Pavlo Selezen
• Pages: 55-62

55

JURIDICA INTERNATIONAL 24/2016

Leonid Tymchenko Pavlo Selezen

Professor, Head of Project Associate Professor,

Research Institute of Senior Research Fellow

Financial Law, Ukraine Irpin, Kiev Region, Ukraine

The Concept of Benef‌i cial

Owner in Application

of the Ukrainian Double

Taxation Treaties

1. Introduction

The provisions on benef‌i cial owner status in the national legislation of Ukraine appeared at the dawn of

the country’s independence. According to Article 7 of the Law on Succession (1991), Ukraine is a successor

taking on rights and obligations under international treaties of the USSR unless they contradict its consti-

tution and the interests of the republic.*1 Such a position of national legislator determined the inclusion of

the double taxation treaties of the former USSR in the Ukrainian legal system in 1991. Most of these treaties

contained provisions on benef‌i cial ownership pertaining to the taxation of passive income at the moment

of their recognition as a part of the Ukrainian legal system. Nevertheless, the provisions on benef‌i cial own-

ers in double taxation treaties had not been referred to in tax disputes until the moment of the Tax Code of

Ukraine taking ef‌f ect, in 2011. They allow the use of provisions related to the status of benef‌i cial owner in

the process of giving access to treaty benef‌i ts.

The changing nature of the concept of benef‌i cial owner, its importance as an instrument for counterac-

tion of treaty shopping, and the necessity of improvement of its application in the Ukrainian reality are the

main factors that have a strong impact on the development of the concept of benef‌i cial owner in Ukraine.

This article focuses on the issues of normative basis and court interpretation of ‘benef‌i cial owner’ in tax

treaty disputes. The objective for the article is to characterise modern tendencies and the main obstacles in

application of the national provisions on benef‌i cial owners since the adoption of the Tax Code of Ukraine.

2. The appearance of the concept of

benef‌i cial owner in the Tax Code of Ukraine

Article 103 (2) of the Tax Code of Ukraine states that a person (tax agent) has a right to use tax exemption

or to lower his or her tax rate in accordance with the provisions of a double taxation treaty of Ukraine in

Қ ро правонаступництво краіни [‘Law on succession of Ukraine’]. – З У No. ҚҞҝҜ-XII, Ққ.Ң.ҚҢҢҚ. Available

at http://zakonқ.rada.gov.ua/laws/show/ҚҞҝҜ-Ққ (most recently accessed on ҚҠ.Ҡ.қҙҚҞ) (in Ukrainian).

http://dx.doi.org/10.12697/JI.2016.24.06