As it is explained in the explanatory note, the bill introducing new corporate income tax rules will make it easier to do business, reduce taxpayer costs, and put into practice the ten steps of the BEPS Action Plan.

In particular, the bill provides for transparent regulation of taxation of foreign companies and the introduction of a number of effective anti-offshore measures (Step 3 of the BEPS Action Plan). The classic capital withdrawal schemes (interest, royalties, investments abroad) become direct taxable entities, which makes it impossible to erode the tax base and to withdraw funds from taxation in Ukraine (BEPS Steps 4, 5). The bill also provides an effective counter to the misuse of tax conventions, since the capital tax is not a repatriation tax and therefore not subject to tax conventions (Step 6 of the BEPS Action Plan).

In addition, the bill also creates conditions to prevent artificial recognition of Permanent Representation status (Step 7 of the BEPS Action Plan) and to improve the control of transfer pricing (Steps 8-10 of the BEPS Action Plan). The bill also aims at moving to international financial reporting standards, streamlining transfer pricing documentation requirements and country-by-country reporting (Step 13 of the BEPS Action Plan).

The draft law provides for the replacement of the corporate income tax with effect from January 1, 2021. The bill also stipulates that the amount of dividends paid for 2020 will not be taxed on deductible capital within the amount of taxable profit from which corporate income tax was previously paid. The object of taxation on capital gains tax is defined as capital withdrawal operations and operations equivalent to capital withdrawal operations.

Capital withdrawal operations will include:

- payment of dividends in favor of the taxpayer,

- payment of part of the profits by state unincorporated, state-owned or public utilities,

- return of contributions to the owner of the corporate rights - the taxpayer (in the amount exceeding the value of the contribution made by the founder and / or the owner to the authorized capital of such legal entity), etc.

Equity-related operations include, but are not limited to:

• interest paid to non-residents - related parties and non-residents registered in states that are "low-tax" jurisdictions;
• payments under insurance or reinsurance contracts in favor of non-resident insurers (in some cases);
• financial assistance provided by the taxpayer to a non-payable taxpayer or to a related party or to an unrelated person and remains unpaid for a period of 12 months (except in some cases);
• payment (transfer) made in connection with: transfer of funds from accounts in Ukrainian banks to taxpayer's accounts opened abroad;
• repayment of obligations arising under contracts, the performance of which does not lead to the transfer of funds to the accounts of taxpayers in Ukrainian banks or to the receipt by the taxpayer of property, works, services;
• business transactions recognized as transfer pricing controlled, if their terms do not comply with the arm's length principle, in the part of the accrued amounts;
• transactions for the free provision of property to the taxpayer (except in some cases);
• payments made in connection with the investment in objects of investment (including the acquisition of property) located outside the territory of Ukraine, the purchase of works, services from a non-resident taxpayer, and / or the transfer of property, the provision of works, services non-payer of tax - non-resident (if the payments or delivery of property, works, services for the respective transactions are not made within 360 days or other time according to the law);
• funds and / or value of property transferred to the authorized capital of the taxpayer;
• the funds and / or value of the property paid in connection with the purchase of goods, works and services from related individuals using a simplified tax system;
• payment of royalties in excess of the limit and in other cases.

The bill makes it impossible to abuse the provisions of the tax conventions by applying reduced or zero rates of tax to certain types of non-resident income, since the deductible capital tax is paid solely by the payers of such tax.

The taxpayers of the deducted capital tax are supposed to identify residents (economic entities - legal entities conducting business both within the territory of Ukraine and abroad) and non-residents (legal entities carrying out activities defined by the Code in the territory of Ukraine and permanent representative offices non-residents operating in Ukraine).

It is proposed to apply the following capital duty tax rates:

 - 15% - for capital withdrawal operations;

 - 20% - for operations equivalent to capital withdrawal operations (except for the operations described below, which are taxed at the rate of 5%);

 - 5% - to the funds paid for execution of debt obligations to related non-resident entities (in cases of exceeding the total amount of debt obligations to all non-resident related entities over the amount of the payer's equity more than 3.5 times ( 20% will apply to financial institutions and companies that exclusively lease - more than 10 times) or to register a non-resident in a state that is a "low-tax" jurisdiction.

It also envisages about the creation of a Register of taxpayers for the deduction of capital, the data of which will be published on the website of the State Tax Service of Ukraine. At the initial stage (until December 31, 2020), the Register will be established by the State Tax Service of Ukraine by including taxpayers of the enterprises registered with the controlling bodies as of December 1, 2020.