Ukraine: Interest paid to Cypriot company qualifies for reduced withholding tax rate (Supreme Court decision)
The court rejected the tax authority's claim that the Cypriot company was merely a conduit and not the beneficial owner.
The Supreme Court held (case no. 520/24629/24) that interest paid to a Cypriot company qualified for the reduced treaty withholding tax rate under the Ukraine–Cyprus income tax treaty. The court rejected the tax authority’s claim that the Cypriot company acted merely as a conduit and was not the beneficial owner of the interest income.
The court first concluded that the concept of a beneficial owner is distinct from that of an ultimate beneficial owner of a corporate group. The court then found that the Cypriot company was the beneficial owner because there were no contractual obligations requiring the Cypriot company to pass the interest to another entity (or any other direct links or transit flows of funds) and the company did not act as an agent or intermediary. Rather, the company carried out genuine financing activities, had authority to make business decisions, assumed credit risks, and used the interest income to extend new loans.
The court also held that the company’s access to the Cypriot notional interest deduction (NID) regime did not affect its beneficial ownership status.
Read a July 2026 report prepared by KPMG’s EU Tax Centre