Germany and Ukraine are replacing their old tax agreement, which dates from 1995, with a more modern double taxation agreement (DTA). The Federal Government tabled a draft bill on this matter in the Bundestag on 1 June 2026. The new agreement was signed in Paris on 19 May 2026.
What is a double taxation agreement?
A double taxation agreement determines which country has the right to tax certain income where an individual or a company could be liable for tax in two countries at the same time. Without such an agreement, income could be taxed in full in both countries, which would be economically damaging.
Why is the agreement being renewed?
The existing double taxation agreement dates from 1995 and no longer meets current international standards. The new agreement is based on the 2017 OECD Model Tax Convention and is intended to remove tax barriers to trade between Germany and Ukraine more effectively than before. A modern legal framework is particularly important in view of Ukraine’s reconstruction and the deepening of economic relations.
An overview of the key changes
- Rules for business premises: The criteria for determining whether a permanent establishment exists for tax purposes are being partially amended. Furthermore, the so-called Authorised OECD Approach (AOA) will apply in future to the allocation of profits to permanent establishments.
- Dividends and capital gains: New rules are being introduced regarding the taxation of dividends and capital gains from the sale of shares.
- Social security pensions: In future, these are to be taxed exclusively in the recipient’s country of residence.
- Protection against misuse: The agreement contains explicit provisions against the misuse of the benefits it provides.
- Exchange of information: Cooperation between the tax authorities of both countries is being expanded. The exchange of information is being brought into line with the current OECD standard, including an updated data protection clause.
- Administrative assistance in the collection of taxes: For the first time, a framework is being established to enable both countries to assist one another in the recovery of tax debts.
- Arbitration proceedings: In the event of unresolved disputes concerning the application of the agreement, an arbitration procedure shall be initiated.
- Hybrid legal entities: The legislation sets out which types of company are eligible to enter into agreements, which is particularly significant for companies with cross-border structures.
When will the new agreement come into force?
The agreement must first be ratified by both states. This means that the national legislative procedures in Germany and Ukraine must be completed and the instruments of ratification exchanged. The agreement will then come into force on 1 January of the year following its entry into force.
What does this mean for businesses and individuals?
For companies with business dealings in Ukraine, as well as for individuals who live in one of the two countries and earn income in the other, the new agreement may result in significant changes to the tax treatment of their income. Anyone affected should keep an eye on further developments in the legislative process and seek tax advice on a case-by-case basis.
Source: Haufe: Tax
This post and the accompanying image were created with the help of AI and have been editorially reviewed.
