Legal evaluation of existing agreements on avoidance of double taxation

The article analyzes double taxation agreements and reveals a number of shortcomings that actually contribute to income shifting. The main shortcomings of the agreements are the application of the principle of residency and the definition of a special mechanism for the payment of passive income. The term “resident” does not have a precise and specific definition. Individuals and legal entities can be residents of many countries at the same time, and identifying a resident’s affiliation to a specific country has a high corruption potential. And the determination of the jurisdiction of the enterprise is also carried out according to the concept of “being managed by a resident”. In the age of digital technology and the Internet, almost any place on planet Earth can be considered a place of control. Therefore, these concepts should be first and foremost specified in the legislation of Ukraine and applied in all concluded agreements on the avoidance of double taxation. In particular, it is necessary to determine whether the enterprise belongs to the jurisdiction of the state in whose territory it is located (it also applies to subsidiaries with the status of a legal entity). And income taxation is carried out according to the principle of source – income is taxed where the enterprise is actually located, the added value is produced, the salary is paid and the profit is received. The concept of “resident” of the country should be replaced by the more specific concept of citizen. When taxing royalties, a distinction should be made between industrial property and copyright. Industrial property is taxed at the place of its use for obtaining income and is paid from the profit that remains after the payment of taxes, contributions and fees provided for by the legislation of the country of the source of income. The fee for the use of the copyright is paid as a reward. The proposed definitions should be used in all double taxation treaties, although the author sees no need to retain these treaties. Therefore, it is possible to propose to denounce all current agreements of Ukraine on the avoidance of double taxation.