FOREWORD. Ukraine. Services provided by member firms include:

2016/17

FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication. The PKF Worldwide Tax Guide 2016/17 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 30 April 2016, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory; Financial Planning / Wealth Management; Corporate Finance; Management Consultancy; IT Consultancy; Insolvency - Corporate and Personal; Taxation; Forensic Accounting; and, Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at www.pkf.com PKF Worldwide Tax Guide 2016/17 1

IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International Limited (PKFI) administers a family of legally independent firms. Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. PKF INTERNATIONAL LIMITED JUNE 2016 PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION PKF Worldwide Tax Guide 2016/17 2

STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX VALUE ADDED TAX (VAT) FRINGE BENEFITS TAX (FBT) SOCIAL SECURITY CONTRIBUTIONS LOCAL TAXES OTHER TAXES LAND TAX DUTIES FOR THE INITIAL REGISTRATION OF VEHICLES PROPERTY TAX SPECIAL PENSION FUND CHARGES STAMP DUTY EXCISE TAX CHARGE ON ENVIRONMENTAL POLLUTION B. DETERMINATION OF TAXABLE INCOME DEPRECIATION STOCK / INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST EXPENSES LOSSES FOREIGN SOURCED INCOME INCENTIVES C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROLS H. PERSONAL TAX MILITARY DUTY I. TREATY AND NON-TREATY WITHHOLDING TAX RATE ON DIVIDENDS PKF Worldwide Tax Guide 2016/17 3

MEMBER FIRM City Name Contact Information Kyiv Sviatoslav Biloblovskiy +38 044 501 25 31 pkf@pkf.kiev.ua BASIC FACTS Full name: Ukraine Capital: Kiev Main language: Ukrainian Population: 42.774 million (2015 estimate) Major religion: Christianity Monetary unit: Ukrainian Hryvnia (UAH) Internet domain:.ua,.укр Int. dialling code: +380 KEY TAX POINTS Tax Code determines taxable profits as net profits before tax as per accounting records, either Ukrainian statutory or International Financial Reporting Standards (IFRS), and adjusted for tax differences. Companies with total revenue from all types of business activities not exceeding 20 mln. UAH are allowed to define taxable profits without considering tax differences. Companies generally pay corporate profit tax at a flat rate of 18%. Reduced rates of 0% or 3% apply to qualified insurance activities. Value Added Tax is currently levied at a rate of 20% of the taxable value of domestic supplies, imported goods and auxiliary services. The rate on exported goods and auxiliary services is 0%. The VAT rate on supply of medicines and medical devices on the list approved by the Cabinet of Ministers of Ukraine is 7%. Ukrainian tax residents are subject to Personal Income Tax (PIT) on their worldwide income, whereas non-residents are only subject to taxation on the Ukrainian sourced portion of their income. The tax rate varies from 5 to 30% of the tax base. It depends on the type and amount of income. The most common applicable rate for PIT is 18%. In 2016 all types of incomes, which are object for PIT, are also object for military duty. The rate of this duty is 1.5% of the taxable income. When paying wages (or similar payment) the source of payment is obligate to accrue and transfer to budget unified social contribution tax (USC). In 2016 the rate is set at the level of 22% in general case. The reduced rate may be applied for some categories of individuals. Legal entities and individuals (incl. non-residents) are the payers of property tax. The tax rate is based on the size of the property and set in percentage (not exceeding 3%) to the minimum statutory wage determined at 1 January of the reporting year. A. TAXES PAYABLE COMPANY TAX The tax that companies pay is known as corporate profit tax (CPT). Currently, this tax is calculated at a flat rate of 18%. For insurance activity, there is an additional tax, which is 3% on amount of insurance contracts from the tax object. This tax is the difference that reduces the profit before tax of the insurer. The rate of this tax for the contracts with term life insurance, a voluntary health insurance and insurance contracts within the non-state pension is 0%. Special rates apply to certain types of businesses. Starting from 01.01.2016 all entities are obliged to pay CPT in advance. The taxable base is calculated as 2/9 of the CPT accrued on the results of 3 quarters of 2016 and must be paid until 31.12.2016. The reporting period for the entities with income for the previous year exceeding 20 000 000 UAH defined as a quarter. For the rest of taxpayers a year. PKF Worldwide Tax Guide 2016/17 4

There are some new restrictions provided for transactions between related parties and transactions with non-residents from low-tax jurisdictions as a new edition of p. 39 of Tax Code came into force in 2015. The transactions between such parties with amount exceeding UAH 5 million (VAT not included) are recognized as "controlled". At the same time the total taxable income of the entity should exceed 50 000 000 UAH. The taxable base for such transaction should be comparable to the taxable bases of similar transactions held by non-related parties. CAPITAL GAINS TAX There is no separate capital gains tax. Capital gains are treated as ordinary income. BRANCH PROFITS TAX There is no special profits tax on branches of foreign companies in Ukraine. VALUE ADDED TAX (VAT) VAT is levied on the sale of most merchandise and services and on imported goods/services. According to the Tax Code, the taxable base for VAT is defined as the contractual value of the goods or services supplied. At the same time, the base for taxation of supplies of goods / services cannot be below the purchase price of goods / services. The tax base of operations of supplying manufactured goods / services cannot be below normal prices and the base of taxation of supplies of fixed assets cannot be lower of the book (residual) value according to the accounting, established at the beginning of the reporting (tax) period during which such operations are carried out VAT is currently levied at a rate of 20% of the taxable value of domestic supplies, imported goods and auxiliary services. The VAT rate on exported goods and auxiliary services is 0%. The rate on supply of medicines and medical devices on the list approved by the Cabinet of Ministers of Ukraine is 7%. Ukrainian VAT legislation for the taxation of services applies the concept of "place of supply. In general, services rendered within the Customs territory of Ukraine are taxed at the general VAT rate, regardless of whether they are rendered to residents or non-residents. However, there are certain exceptions to this rule. According to the Tax Code, certain transactions are exempt from VAT and are not subject to VAT. If entities meet certain criteria, they may be subject to mandatory registration as VAT payers. One such criterion is the volume of taxable supplies of goods/services during the previous 12-month period, with the taxable threshold set at UAH 1 000 000. However, if an entity's volume of taxable supplies in this period was less than UAH 1 000 000, then it can opt to register voluntarily. The above mentioned requirement to register for Ukrainian VAT purposes applies to both resident and nonresident entities. If an entity imports goods to Ukraine in taxable quantities, it is obliged to pay VAT during the Customs clearance process without the need to register as a VAT payer. In addition to taxable entities, VAT law defines the concept of a tax agent (individual responsible for accruing and withholding VAT) and states that, when non-residents provide services that qualify as taxable supplies in Ukraine, VAT should be accrued and remitted to the budget by the Ukrainian customer. For VAT accounting purposes, the so-called "first event" rule is normally used. According to this rule, output and input VAT on domestic sales are assessed in the reporting period in which goods/services are supplied or payment is received. In general, the tax period for VAT purposes is a calendar month. Entities liable to pay VAT must therefore submit tax returns and remit VAT on a monthly basis. According to the effective tax legislation, agricultural producers may apply a special tax regime according to which the VAT liabilities collected by agricultural companies are not payable to the budget but may be used for special business purposes. In 2016, a system of electronic administration continues to operate. It includes Electronic registration of tax invoices and automatic control of it by tax authority. Starting from 01.07.2015, VAT-payers are obliged to use special bank accounts for operations with VAT. These accounts are opened automatically in the State Treasury of Ukraine. PKF Worldwide Tax Guide 2016/17 5

FRINGE BENEFITS TAX (FBT) Both residents and non-residents are taxed on fringe benefits (treated as payment in kind). The value of the benefits is taxed as the employment income by grossing up for Personal Income Tax (PIT). SOCIAL SECURITY CONTRIBUTIONS Employers are liable to pay Unified Social Security Contributions relating to salaries and benefits paid to their employees. The maximum for the single contribution base is set at 25 times the average monthly cost of living and currently (as at 1 January 2016) stands at UAH 33,250. The rates applicable up this amount are as follows: Type Unified Social Security Contribution Rate Employer s Contribution Employee s Contribution Enterprises and PEs using a hired labour force (labour contracts ) 22% 0 % Employers paying remuneration under civil law contracts 22% 0% PEs registered as taxpayers under the simplified tax system 22% Individuals engaged in independent professional activities 22% There is a special reduced rate of USC for the payments to individuals with physical disabilities 8.41%. LOCAL TAXES There are number of taxes at the local level, including property tax, parking duties, unified tax, and tourism duties. In general, local taxes (except unified tax) and duties do not have a significant impact on a taxpayer's tax position. OTHER TAXES LAND TAX Land tax is imposed on owners and users of land. The amount of tax payable depends on the use (e.g. farmland) and location of the land. DUTIES FOR THE INITIAL REGISTRATION OF VEHICLES A transport tax on luxury cars is imposed - it is payable by companies and individuals owning cars that were used up to 5 years and have engine, which is more than 3,000 cubic cm. The tax rate is 25 000 UAH per year for each car. PROPERTY TAX Property (Real Estate) tax was applied from 1 January 2013 and is imposed on owners of residential property - both individuals and legal entities - including non-residents. Real Estate Tax rates shall be set by local authorities but shall not exceed: 3% of the minimum statutory monthly salary established as of 1 January of a reporting year per m² of an apartment, house or non-residential real estate. Tax relief for up to 60 m² per apartment and 120 m² per house is given to individual real estate taxpayers if property is used for private purpose only. Starting from 2015, property tax was extended to cover commercial real estate owned by legal entities and individuals. There are statutory PKF Worldwide Tax Guide 2016/17 6

exemptions from tax (e.g., production facilities and warehouses of industrial enterprises, buildings and constructions used in agricultural production). The amounts of property tax on commercial real estate paid by the legal entity can be credited/set-off against the corporate profit tax (CPT). SPECIAL PENSION FUND CHARGES The following special charges are payable to the State Pension Fund: 3% - 5% charge depending on the transfer value of the car (charged only at initial registration); 1% charge on the acquisition of real estate payable by individuals and legal entities that purchase real estate; 7.5% charge on mobile communication services; 2% charge on purchases of foreign currency (only for cash operations). There are also a number of other business activities that require contributions to be made to the Special Pension Fund. STAMP DUTY Stamp Duty is imposed on certain transactions, including notarisation of contracts and the filing of documents with the courts. In most cases, the amounts involved are nominal, although there are exceptions. Operations carried out at commodity exchanges and sales of real property incurs a stamp duty of 1% EXCISE TAX Excise Tax is payable on cars, alcoholic beverages, tobacco products, beer and petrol and diesel fuel, whether imported or produced domestically. Rates of excise duty are specific. CHARGE ON ENVIRONMENTAL POLLUTION Environmental pollution charges are imposed on any legal entity that discharges contaminants into the environment (air or water) or disposes of waste. The actual rate depends on the type and toxicity of each contaminant. B. DETERMINATION OF TAXABLE INCOME According to domestic tax accounting rules, taxable items are normally recognised on the basis of the accrual method. In accordance with this method, taxable income is generally recognised in the reporting period in which it was accrued. In general, deductible expenses are recognised when they are incurred (i.e. upon receipt of goods or services), regardless of the period of payment. The expenses must be recognized in the reporting period when the related to these expenses income is recognized. Resident entities are taxed on the worldwide income they receive or accrue within the reporting period. The amount of taxable income is determined by subtracting the costs of sales and other allowed deductible expenses from taxable income. Depreciation charges are included in deductible expenses. Gross taxable income is defined as any income, from domestic or foreign sources, that is received or accrued by the taxpayer in the course of conducting any activity. This income may be in monetary, tangible or intangible form. The Tax Code provides for gross taxable income to be reduced by the tax cost of sales and other deductible expenses to calculate taxable income. The Tax Code determines taxable profits as net profits before tax as per accounting records, either Ukrainian statutory or International Financial Reporting Standards (IFRS), and adjusted for tax differences. Companies with total revenue from all types of business activities not exceeding 20 mln. UAH are allowed to define taxable profits without considering tax differences. PKF Worldwide Tax Guide 2016/17 7

DEPRECIATION Depreciation allowances are permitted for all capital assets, including both fixed and intangible property, except for land, goodwill, fixed assets under conservation and non-business-related capital assets. According to the Tax Code, fixed assets are divided into 16 groups according to their minimum useful life for tax depreciation purposes. Groups Fixed assets included in this group Minimum useful life, years Group 1 Plots of land - Group 2 Capital expenditure on land improvements unrelated to construction 15 Group 3 Buildings 20 Facilities 15 Transmission devices 10 Group 4 Machinery and equipment 5 Computers and other automatic data processing equipment; related information read-out and printing equipment; related computer programs (except for payments for programs that are classified as royalties and/or programs treated as intangible assets); other information systems; switch boxes, routers, modules and modems; uninterrupted power supplies and means connecting them to telecommunications networks; telephones (including satellite phones), microphones and portable radio transmitters worth over UAH 2,500 Group 5 Motor vehicles 5 Group 6 Instruments, devices, furniture 4 Group 7 Animals 6 Group 8 Perennial plants 10 Group 9 Other fixed assets 12 Group 10 Library funds - Group 11 Low-cost non-current tangible assets - Group 12 Temporary facilities 5 Group 13 Natural resources - Group 14 Reusable containers 6 Group 15 Rented assets 5 Group 16 Long-term biological assets 7 2 For tax purposes, fixed assets are depreciated during their useful lives using one of the following four methods: Straight line method; Reducing balance method; Accelerated reducing balance method; Cumulative method; Each fixed asset is accounted for separately and depreciated over its useful life, as defined in the taxpayer's tax policy, but which should be at least the minimum useful life period indicated in the Tax Code. If the useful life period defined for the purposes of accounting exceeds the minimum period indicated by Tax Code then one should use greater value. The tax depreciation method used should PKF Worldwide Tax Guide 2016/17 8

correspond with the taxpayer's UAS (Ukrainian Accounting Standards) policy. According to the Tax Code, intangible assets are divided into six groups. Each intangible asset should be accounted for separately and amortised using one of the abovementioned methods over its useful life, taking into consideration the minimum useful life established by the Tax Code. Groups Fixed assets included in this group Minimum useful life, years Group 1 Rights to use natural resources According to the entitling document Group 2 Rights to use property According to the entitling document Group 3 Rights to use commercial branding (trademarks, etc.) According to the entitling document Group 4 Industrial property rights According to the entitling document but no less than five years Group 5 Copyrights and related rights According to the entitling document but no less than two years Group 6 Other intangible assets According to the entitling document STOCK / INVENTORY Generally, stock is valued at its purchase cost. The Tax code contains no provision concerning valuation of stock. The cost of materials transferred to production may be determined by the following valuation methods: average cost, cost of item, FIFO, price of sales or standard cost. CAPITAL GAINS AND LOSSES As mentioned above, capital gains and losses are subject to profit tax at regular corporate rates. DIVIDENDS Dividends paid by Ukrainian companies are subject to Advanced Corporation Tax (ACT), which is calculated based on the statutory tax rate. Advance payment is calculated on the excess amount of dividends to be paid over the value of the object of taxation for the reporting year on the results of which the dividends are paid and for which the liability is paid. In the case of the liability outstanding advance payment calculated on the full amount of dividends to be paid. Advanced Corporation Tax is due prior to or upon the payment of dividends. Ukrainian companies may use Advanced Corporation Tax they have paid to reduce their CPT liabilities for future periods. If the taxpayer does not have sufficient CPT liabilities for a period, then this Advanced Corporation Tax credit may be carried forward indefinitely. Advanced Corporation Tax does not apply to dividends paid by the following entities: Ukrainian holding companies within its income received of dividends from other Ukrainian legal entities; Investment funds; Tax payer, whose income exempt from tax under the provisions of this Code in the amount of income exempted from tax in the period for which the dividends are paid; The dividends paid to individuals are not subject to ACT Interest deductions. INTEREST EXPENSES Any interest expenses incurred by a taxpayer in the course of carrying out business activities are generally deductible. However, interest deductibility limitations do apply to resident taxpayers in the following circumstances: For the taxpayer, whose amount of debt arising from transactions with related parties - nonresidents exceeds the amount of equity in over 3, 5 times (for financial institutions and companies PKF Worldwide Tax Guide 2016/17 9

engaged exclusively in leasing activity, more than 10 times), the financial result before tax increases by the excess of accrued interest for loans, borrowings and other debt over 50 percent of the financial result before tax, finance costs and the amount of depreciation according to the financial statements of the reporting tax period in which the accrual of interest. The exceeding amount can be used for tax purposes (as deduction) in future periods, considered the written above. LOSSES Taxpayers' tax losses may be carried forward and should be reported in CPT returns for subsequent periods as a separate deductible expense although there are specific limitations for utilising such losses in future tax periods. Tax losses that have accumulated up to 31 December 2011 must be spread evenly over the four period 2012-2015 so that only 25% of that loss may be utilised in each year. If 25% of such loss is not redeemed in the reporting (tax) periods in 2015, the outstanding amount is to be considered when determining the tax liability in the future periods until full redeeming of such negative value. A special method applies for accounting for losses relating to securities. FOREIGN SOURCED INCOME Foreign sourced income and gains are subject to profit tax at the regular rate except dividends. INCENTIVES Small businesses may choose to adopt the Simplified tax system, which is designed to reduce the tax and administrative burden on legal entities and private individuals. Taxpayers eligible to use this system, rates of tax and permitted types of business activities are described in the table below: Group Maximum annual income, UAH Maximum number of employees Types of permitted activities* Rate, % 1 (individuals) 2 (individuals) 3 (individuals and legal entities) 4 (agricultural producers) 300,000 None 1,500,000 Max 10 persons Trading only with private individuals (retail sales and/or rendering of services) Trading only with private individuals or other simplified taxpayers (production of goods and/or rendering of services except for certain types of operations) 5 000 000 Not limited Any* Not limited Not limited Share of agricultural commodity production in the previous tax (reporting) year equals or exceeds 75 percent** 10 Min statutory salary level 20 Min statutory salary level 3 % of income (VAT payer) 5 % of income (non-vat payer) Depends on the type of land * The following business activities are prohibited for the simplified tax system: PKF Worldwide Tax Guide 2016/17 10

Gambling establishments; Exchange of foreign currencies; Production, export, import and sale of excisable goods; Extraction, production and realisation of precious metals and precious gems; Extraction and realisation of mineral resources; Financial services except insurance; Management of enterprises; Postal and connection services; Sales of works of art, antiques; and, Touring events businesses. Legal entities and individuals using the Simplified Tax System are exempt from the following taxes: Corporate Profits Tax; Personal Income Tax (on income of individual entrepreneurs only); Value-Added Tax (except for those opting to be VAT payers); Property tax Rent for special use of water (4-th group) ** Impossible to choose the simplified tax system for entities that carry out activities for the production of excisable goods other than wine grape C. FOREIGN TAX RELIEF A tax credit for foreign taxes paid on foreign-sourced profits or revenues is available subject to a limit of the maximum amount of Ukrainian tax due on the same profits or revenues. Any excess foreign tax credits may not be transferred to future or previous periods. Individuals are allowed to claim a credit for foreign taxes paid on income received abroad, provided there is a double tax treaty between Ukraine and the relevant foreign state. The amount of foreign tax credit is limited to the amount of Ukrainian tax that would arise from the same income in Ukraine. To claim a tax credit, the taxpayer must obtain an official confirmation of the amounts of income subject to tax abroad and the tax paid thereon, issued/verified by the relevant foreign tax authority. D. CORPORATE GROUPS Starting from 1.1.2015 a taxpayer may not apply to pay consolidated CPT. The new edition of Tax Code does not contain such option. The payment should be made on general conditions. E. RELATED PARTY TRANSACTIONS Transfer pricing rules require some transactions to be recognised for tax purposes at fair market values (known as the arm-length principle (ALP)). The tax authorities have power to raise assessments if transactions between the taxpayer and associated companies are not based on fair market values. The Tax code prescribes to prepare a report on transfer pricing on a yearly basis for entities who conducted controlled operations. PKF Worldwide Tax Guide 2016/17 11

F. WITHHOLDING TAX Domestic withholding tax rates are set out in the table below (although more favourable treaty rates may apply). In order to benefit from any applicable treaty relief, a non-resident should provide the Ukrainian taxpayer with a residency certificate issued annually by the tax authorities of their country of residence. The amount withheld should be remitted to the government when the income is paid to the non-resident. Non-business-related income may be paid to non-residents from Ukrainian sources, provided that it is not attributable to a non-resident's PE in Ukraine. Income from Ukrainian sources Withholding tax rate Dividends 15% Interest 15% Royalties 15% Income from international freight transportation 6% Interest income from certain state securities 0% Other Ukrainian-sourced income 15% A special tax is levied on insurance and advertising income payable from the Ukraine to non-residents. This tax should be accrued on top of the Income from Ukrainian sources payment (i.e. the gross amount) at the following rates and is non-recoverable for the taxpayer (see table below). Income from Ukrainian sources Tax rate Insurance income 0% / 4% / 12% Income from advertising services 20% G. EXCHANGE CONTROLS Currency operations that take place in Ukraine fall under state currency control regulations, a key feature of which is the concept of residency. Only local currency (UAH) may be used in business transactions between residents. Residents and non-residents involved in international trade and investment transactions generally use a foreign currency. Foreign currency proceeds received by a company from its foreign clients must be credited to a local bank account within 90 days of the export date of the services or goods. Failure to comply with this provision will result in the Ukrainian company being liable to pay a penalty of 0.3% of the proceeds for each day of the delay. Goods must be imported into Ukraine within 90 days of prepayments being made by a Ukrainian company to its suppliers. Failure to comply with this provision will result in the Ukrainian company being liable to pay a penalty of 0.3% of the cost for each day of the delay. Certain other transactions involving local and foreign currencies are subject to licensing by the National Bank of Ukraine (e.g. settlements made in a foreign currency on Ukrainian territory). Ukrainian residents are also required to obtain an individual license to make investments abroad. All entities are required to sell at least 75% of revenue they receive in specified foreign currencies (US Dollars, Euros, British Pounds, Swiss Francs and Russian roubles) and precious metals. H. PERSONAL TAX The Personal Income Tax (PIT) base for Ukrainian and foreign nationals depends on their tax residency status. Ukrainian tax residents are subject to PIT on their worldwide income, whereas nonresidents are only subject to taxation on the Ukrainian-sourced portion of their income. The Tax Code also provides for a self-recognition procedure, according to which an individual can voluntarily elect to be a Ukrainian tax resident. Domestic laws provide tax residency rules and these provisions may be overruled by the respective provisions of relevant double tax treaties. The following PIT rates are PKF Worldwide Tax Guide 2016/17 12

generally applied: 18% - on the worldwide income of tax residents and the Ukrainian-sourced income of nonresidents. 0% - on inheritance from immediate family members, income from the first sale of qualifying residential property and plots of land not exceeding the limit for free land transfers (provided that the property has been in ownership for more than three years) 5% - for tax residents on: income from the sale of commercial property; income from the second and any further sale of residential property within one reporting year; income from the sale of movable property by its owner, other than the first sale of a vehicle; income from the sale of plots of land over of the maximum area for free land transfers; on dividends issued by a resident issuer (except accrued dividends on shares and / or investment certificates) ; and on inheritance paid to non-relatives. T The Tax Code also provides a list of items that must be included in an individual's taxable income. These include, among other things, gifts, insurance contributions and premiums, rental income and fringe benefits. Contributions to unqualified pension plans made on behalf of a taxpayer by another person/an employer will also be included into an individual's taxable income. Income received from the sale of real estate is not taxable if the property is sold only once during a calendar year, regardless of the size of property. Revenue earned from the sale of a house, apartment, part of an apartment, room or cottage (including the plot of land, on which it is located) is: Not subject to tax if sold only once during a calendar year, and if the property has been owned for more than three years; or, Subject to 5% tax, which is levied on the amount received for a second sale of the property within a reporting year. Foreign individuals, who are considered Ukrainian tax residents, are taxed in the same manner and according to the same rules as Ukrainian citizens. MILITARY DUTY In 2016 all types of income, which are subject for PIT, are also subject to Military Duty. The rate of this duty is 1.5% of the taxable income. I. TREATY AND NON-TREATY WITHHOLDING TAX RATE As of December 2015, Ukraine has up to 72 double tax treaties in effect. Withholding taxes on interest, dividends and royalties are typically reduced by the treaties. A summary of withholding rates under the various treaties is provided in the table below. But it should be considered that in every special case the terms and conditions of specific treaty shall be explored. Taxpayers do not require confirmation from the tax authorities before claiming relief under a treaty. However, the withholding agent must hold a certificate of residence from the treaty country for the person to whom income is paid. The certificate should be provided to the tax authorities no less than once every two years. In addition to the above, the Tax Code requires the recipient of all types of income from Ukraine to be the beneficial owner (actual recipient) of the respective income. Agents, nominee holders and other intermediaries in respect of the received income cannot be beneficial owners of income sourced in Ukraine, and, therefore, are not entitled to favourable treaty provisions. Recipient Dividends (%) Non-portfolio (1) Portfolio Interest (%) (2) Royalties (%) (3) Domestic rates: Non-resident individuals 5/[18] (4) 5/[18] (4) 18 18 Non-resident corporations 15 15 15 15 Treaty rates: Algeria 5 15 10 10 Armenia 5 15 10 0 Austria 5 10 2/5 (5) 0/5 PKF Worldwide Tax Guide 2016/17 13

Recipient Dividends (%) Non-portfolio (1) Portfolio Interest (%) (2) Royalties (%) (3) Azerbaijan 10 10 10 10 Belarus 15 15 10 15 Belgium 5 15 2/10 (5) 0/10 Brazil 10 15 15 15 Bulgaria 5 15 10 10 Canada 5 15 10 0/10 China, People s Republic of 5 10 10 10 Croatia 5 10 10 10 Cyprus (19) 5 15 2 5/10 Czech Republic 5 15 5 10 Denmark 5 15 0/10 (7) 0/10 Egypt 12 12 12 12 Estonia 5 15 10 10 Finland 0/5 (8) 15 5/10 (7) 0/5/10 France 0/5 (9) 15 2/10 (5) 0/5/10 Georgia 5 10 10 10 Germany 5 10 2/5 (5) 0/5 Greece 5 10 10 10 Hungary 5 15 10 5 Iceland 5 15 10 10 Ireland 5 15 5/10 (20) 5/10 India 10 15 10 10 Indonesia 10 15 10 10 Iran 10 10 10 10 Israel 05.окт 15 5/10 (10) 10 Italy 5 15 10 7 Japan (6) 15 15 10 0/10 Jordan 10 15 10 10 Kazakhstan 5 15 10 10 Korea, Republic of 5 15 5 5 Kuwait 5 5 0 10 Kyrgyzstan 5 15 10 10 Latvia 5 15 10 10 Lebanon 5 15 10 10 Libya 5 15 10 10 Lithuania 5 15 10 10 Macedonia 5 15 10 10 Malaysia (6) 15 15 15 10/15 Mexico 5 (17) 15 10 10 Moldova 5 15 10 10 Mongolia 10 10 10 10 Morocco 10 10 10 10 Netherlands 0/5 (11) 15 2/10 (5) 0/10 PKF Worldwide Tax Guide 2016/17 14

Recipient Dividends (%) Non-portfolio (1) Portfolio Interest (%) (2) Royalties (%) (3) Norway 5 15 10 5/10 Pakistan 10 (16) 15 10 10 Poland 5 15 10 10 Portugal 10/15 (12) 15 10 10 Romania 10 15 10 10/15 Russian Federation 5 (13) 15 10 10 Saudi Arabia 5 (18) 15 10 10 Serbia and Montenegro 5 10 10 10 Singapore 5 15 10 7.5 Slovakia 10 10 10 10 Slovenia 5 15 5 5/10 South Africa 5 15 10 10 Spain (6) 15 15 0 0/5 Sweden 0/5 (14) 10 0/10 (5) 0/10 Switzerland 5 15 0/10 (5) 0/10 Syria 10 10 10 15 Tajikistan 10 10 10 10 Thailand 10 15 10/15 (10) 15 Turkey 10 15 10 10 Turkmenistan 10 10 10 10 United Arab Emirates 5 15 3 0/10 United Kingdom 5 10 0 0 (15) United States 5 15 0 10 Uzbekistan 10 10 10 10 Notes 1. The ownership threshold for the non-portfolio rate is 10%, 20%, 25%, or 50%, depending on the specific provisions in the treaty. 2. Several treaties contain a rate of 0% on interest paid to or guaranteed by a government or one of its agencies. 3. If more than one rate is shown, this means that the rate will depend on the type of royalties paid. 4. The 18% rate applies to dividends from privileged shares or other fixed payments on shares, as well as to disguised employment income. Dividends received from a Ukrainian legal entity CIT payer (other than collective investment arrangement) are subject to the 5% rate. 5. The lower rate applies to interest paid on certain credit sales and on loans granted by a financial institution. 6. The treaties with Japan, Malaysia, and Spain were entered into by the USSR before it dissolved. Ukraine will continue to honour these treaties, unless they are superseded. 7. The lower rate applies to interest paid in connection with the sale on credit of any industrial, commercial, or scientific equipment, unless the indebtedness is between associated enterprises. 8. The 0% rate applies if the investor holds at least 50% of the capital of the company paying the dividends and the capital invested is at least 1 million United States dollars (USD); the payer of dividends should not operate in the field of gambling, show business or an intermediation business, or in auctions. 9. The 0% rate will apply if a French company or companies hold, directly or indirectly, at least PKF Worldwide Tax Guide 2016/17 15

50% of the capital of the Ukrainian company, and the aggregate investments exceed 5 million French francs. 10. The lower rate applies to interest paid on any loan granted by a bank. 11. The 0% rate applies if the investor directly holds at least 50% of the capital of the company paying the dividends, and the capital invested is at least USD 300,000. 12. The 10% rate applies if the company receiving the dividend has, for an uninterrupted period of two years before the dividend is paid, owned at least 25% of the capital stock of the company paying the dividends. 13. The 5% rate applies if the capital invested is at least USD 50,000. 14. The 0% rate applies if the Swedish company directly holds at least 25% of the voting power of the company paying the dividends and at least 50% of the Swedish company is held by Swedish residents. 15. The 0% rate applies only if the royalties are taxable in the United Kingdom. 16. The 10% rate applies if the company receiving the dividend directly owns at least 25% of the capital stock of the company paying the dividends. 17. The 5% rate applies if the investor (other than partnership) being a beneficial owner holds at least 25% of the capital of the company paying the dividends. 18. The 5% rate applies if the investor, being a beneficial owner, holds at least 20% of the capital of the company paying the dividends. 19. The 5% rate on dividends applies if the investor holds at least 20% of the capital of the company paying the dividends or the capital invested is at least 100,000 euros (EUR). The 5% rate on royalties applies in relation to royalties on trademarks, patents, or know-how. 20. The 5% rate applies in the case of interest paid in connection with the sale on credit of industrial, commercial or scientific equipment or on any loan granted by a bank. PKF Worldwide Tax Guide 2016/17 16