Ukraine launches new BEPS Implementation Roadmap to boost efforts to align with international tax standards

On 10-12 July 2023, Deputy Minister of Finance Svitlana Vorobey led Ukraine’s delegation to the 15th plenary meeting of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (Inclusive Framework on BEPS) at the OECD Conference Centre in Paris, France.

On the margins of the meeting, the Deputy Minister met with Director of the OECD Centre for Tax Policy and Administration Manal Corwin to report on the progress Ukraine has made in the implementation of the international standards in the period 2017-2022 and agreed the intensified collaboration and support from OECD Secretariat for the period 2023-2025.

Ukraine is a member of Inclusive Framework on BEPS since 2017 and in the period 2017 – 2022 benefited from an Induction Program and several capacity building activities to support the implementation of the BEPS measures, which have resulted in significant legislative improvements and consistent application of international tax standards in Ukraine.

These efforts have reduced tax evasion and tax avoidance while also improving the investment climate by adhering to consistent implementation and application of international standards.

During this meeting, the Deputy Minister signed an updated BEPS Implementation Roadmap, which builds on the prior work carried out since 2017, and outlines plans for further support by the OECD Secretariat in the process of implementation of a number of other BEPS measures, as well as plans for carrying out capacity-building activities to ensure effective application and administration of the relevant international standards.

The Roadmap identifies the priority actions for the period 2023-2025 and seeks to assist Ukraine in addressing new and unique challenges emerging from the current circumstances brought by the Russian invasion and ongoing war of aggression, as well as intensifying its efforts to align with international tax standards. This is also of strategic importance in anticipation of significant Foreign Direct Investment related to the recovery and reconstruction period.

The implementation of BEPS measures and the related capacity building activities are also an important part of the Ukraine Country Programme agreed by the OECD and the Government of Ukraine on 7 June 2023 that will support Ukraine’s agenda for reform, recovery and reconstruction and will help Ukraine advance its ambitions to join the OECD and the European Union.

During the 15th plenary meeting, Ukraine together with 137 members of the Inclusive Framework on BEPS agreed an Outcome Statement on the Two‐Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, recognising the significant progress made and allowing countries and jurisdictions to move forward with historic, major reform of the international tax system.

The Outcome Statement summarises the package of deliverables developed by the Inclusive Framework to address the remaining elements of the Two‐Pillar Solution:

• A text of a Multilateral Convention (MLC) developed by the Inclusive Framework, which allows jurisdictions to reallocate and exercise a domestic taxing right over a portion of MNE residual profits (Amount A of Pillar One) ;

• A proposed framework for the simplified and streamlined application of the arm’s length principle to in-country baseline marketing and distribution activities (Amount B of Pillar One);

• The Subject-to-Tax Rule (STTR) together with its implementation framework, which will enable developing countries to update bilateral tax treaties to “tax back” income on certain intra-group income where such income is subject to low or nominal taxation in the other jurisdiction.