Minister of Finance: EU can impose sanctions against Ukraine due to failure to sign treaty on offshore companies

Minister of Finance Oleksandr Danyliuk warned that the European Union could introduce economic sanctions against Ukraine if the MLI or Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Prevent Base Erosion and Profit Shifting) is not signed.

"We must sign a multilateral convention to implement measures related to the taxation agreement before June 28. This is the so-called MLI. The relevant decision was made by the Cabinet of Ministers back in December last year," the Finance Minister said at a cabinet meeting on Wednesday, May 23, FinClub news outlet reports.

Danyliuk reminded Prime Minister Volodymyr Groysman about the need to grant him the authority to sign the declaration on behalf of Ukraine.

"I am still waiting for the powers that will give me the right to sign this. Why is it important to do this before June 28? This is the last chance for Ukraine to join this agreement and it will still have to be ratified. This process should be completed before the end of the year. If it is not done, there’s a risk that the European Union imposes sanctions on Ukraine," Danyliuk explained.

The head of the Ministry of Finance pointed out that signing and ratifying the MLI was important to improving the investment climate in Ukraine.

The day before, the Ministry of Finance warned that Ukraine could be added to the EU Offshore Blacklist if the MLI were not signed and ratified.

The MLI signing process is at the stage where the President must respond to the request to grant the appropriate authority to the Minister of Finance. Afterwards, the Agreement should be ratified by the Verkhovna Rada.

The MLI Convention is a part of the action plan to prevent BEPS, a set of tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. By signing and ratifying the multilateral convention, Ukraine simultaneously fulfills several paragraphs of the plan that are included in the minimum standard of BEPS.

On December 5, the EU approved a "black list" of tax havens that includes 17 jurisdictions that refuse to cooperate with the EU on tax issues. Later, the EU removed eight countries and territories from the list but it is still unclear what the EU plans to do with the blacklisted territories.

  Sanctions, Ukraine