On 1 January 2018 the Law of Ukraine No. 2245-VIII dated 7 December 2017 has entered into force introducing new rules of taxation of payments under syndicated loans structures involving a facility agent.

The new rules establish "look through" approach for taxation of interest and other fees payable under such loans. Accordingly, whilst paying interest or other income in favour of a facility agent, a Ukrainian borrower may apply tax treatment (reduced tax rate or tax exemption) provided by Tax Treaties between Ukraine and countries where lenders are tax residents, despite such income is actually paid through facility agent.

To apply this approach syndicate lenders must be beneficial owners of the income payable by Ukrainian borrower. At that, part of income relating to each lender, to which respective tax rate will be applied, is calculated as pro rata based on participation in the syndicated loan agreement.

These changes are a positive step towards attraction of investment into Ukraine, since they give more confidence to foreign lenders in their relations with Ukrainian borrowers, as well as make syndicated loans structures more predictable. 

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