LETTER OF STATE TAX ADMINISTRATION OF UKRAINE

of June 17, 2011 No. 11297/6/15-0318

GNAU considered the letter of PRAO of rather some questions of application of items 160.2 and 160.7 of Art. 160 of the Tax code of Ukraine (farther the Code) and reports.

According to item 160.7 of Art. 160 of the Code residents which perform payments to nonresidents for production and/or distribution of advertizing about such resident during such payment pay tax at the rate of 20% of the amount of such payments on own account.

Application of this regulation requires accomplishment at the same time of two conditions: payment from resident shall be performed directly to the nonresident and this payment shall be for production and/or distribution of advertizing about such resident.

Thus, if PRAO performs in Ukraine payment to resident of services for production and/or distribution of advertizing about the activities outside Ukraine, then regulations of item 160.7 of Art. 160 of the Code will not be applied to such payments of PRAO.

Along with it regulations of item 3.2 of Art. 3 of the Code it is established if the international treaty which consent to be bound is provided I LIE, other rules are established, than those which are provided by this Code are applied rules of the international treaty.

That is, rules of international treaties, including concerning nondiscrimination extend to payments of PRAO for production and/or distribution of advertizing about the activities outside Ukraine to the nonresident of the country with which Ukraine signed the convention (agreement) on avoidance of double taxation.

According to item 160.1 of Art. 160 of the Code any income received by the nonresident with source of their origin from Ukraine from carrying out economic activity is assessed with tax according to the procedure and at the rates determined by this Article.

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