Asters successfully defended the interests of a company belonging to one of Ukraine’s largest media groups in a dispute regarding the cancellation of withholding tax assessments

Asters’ tax dispute resolution team has successfully represented the company belonging to one of Ukraine’s largest media groups in the cancellation of tax charges arising from the application of a Double Tax Treaty.

The dispute concerned the withholding tax (WHT) applicable to royalty payments under sublicense agreements granting rights to use film, video, and television content.

The tax authority argued that the company was not entitled to apply a reduced WHT rate upon royalty payments under the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes and Income and Capital Gains (Double Tax Treaty). The tax authority insisted that the restructuring of the Group and the subsequent execution of a sublicense agreement had the primary purpose of obtaining tax benefits under the Double Tax Treaty, which, it alleged, indicates that the transactions failed to meet the Principal Purpose Test.

During the court hearings, Asters’ lawyers emphasized the incorrect application of Article 12(5) of the Double Tax Treaty upon analysis of the Company’s transactions. The argumentation and evidence collection focused on confirming that the replacement of the licensor and the entry into a new agreement were justified by the legitimate economic considerations and business purposes. Additionally, the team provided evidence that the non-resident counterparty was not an intermediary but an independent entity that determined the economical use of income, carried commercial risks, owned significant assets, and did not transfer the funds it obtained to third parties in a short period. The argument that the tax authority violated procedures for appointing and conducting the tax audit during the quarantine moratorium was also raised.

Both the first-instance and appellate courts upheld the company’s position, cancelled the tax notification-decisions as unsubstantiated. The Supreme Court declined to open a cassation consideration initiated by the tax authority.

The case was handled by Asters’ tax dispute resolution team led by Counsel Larysa Antoshchuk and included Associate Oleksandr Matokhniuk and Junior Associate Bohdan Trokhymets.

Asters is Ukraine's largest full-service law firm with offices in Kyiv, Brussels, London, and Washington, D.C. The firm has access to over 125 jurisdictions through its extensive network of partner law firms.