Following protests from Estonia and Latvia, the Ukrainian government removed Estonia, Latvia, Georgia, Malta and Hungary from the list of countries viewed by Ukraine as tax havens. Minister of Foreign Affairs Sven Mikser (SDE) hailed the decision, saying that relations with Ukraine were too important to allow them to be compromised.
Ukrainian Minister of Finance Oleksandr Danyliuk said that the decision made in December to place these countries on the list of countries transactions with whose residents are supervised by Ukraine for transfer pricing purposes was made without agreeing on the step with the partner countries, and the Ukrainian government and Ministry of Finance would now take two months for consultations.
"In some countries, there are requirements in their legislation saying that money from Ukraine can be removed at a zero rate," Danyliuk explained.
Mikser praised the institutions of the Estonian state for their work on having Estonia removed from Ukraine's list, adding that relations between Estonia and Ukraine are too important to let them be compromised by incidents like this one.
"This is definitely a positive development, and I would like to applaud the work of our ambassador as well as of the embassy in Kiev; also the Office of the Prime Minister of course," Mikser told BNS. "Prime Minister Jüri Ratas has done a very good job on his level in communicating with his contacts in Kiev."
Mikser also recognized the work of officials at the Ministry of Finance in explaining to their Ukrainian colleagues why Estonia end up on that list was a mistake.
"This is definitely a positive solution to one unpleasant incident, and we hope that nothing like this will be repeated in the future and it will not undermine the interests and the activities of our entrepreneurs in Ukraine in the long term," the foreign minister said.
"Relations between Estonia and Ukraine are too important both for us and for Ukraine to let them be compromised by incidents like this," Mikser said. "This has of course undermined the situation for our entrepreneurs in the short term; hopefully the solution will be quick and in the future our entrepreneurs will be able to do business in Ukraine without obstacles and without having to incur additional costs."
New countries affected beginning Jan. 1
At the end of 2017, the Ukrainian government put Estonia, Latvia, Iran, Cuba, Laos, Lebanon, Malta, Morocco, Monaco, the UAE, Singapore, Georgia and Hungary on a list of countries transactions with whose residents 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 countries on the list increased from 65 to 85.
The ministry explained that the enlargement of the list was connected with changes in the criteria for compiling the list. The list was compiled of states and territories where the corporate profit tax rate is five or more percent lower than in Ukraine, i.e. below 13 percent, states with which Ukraine has not yet agreed on exchange of information, and states whose authorities do not provide fiscal information to the Ukrainian state fiscal service on time and in full.
The decision entered into force on Jan. 1, and prompted protests from Latvia and Estonia, which tax corporate profits when they are taken out of a business as dividends.
Editor: Aili Vahtla