Article 2. TAXES COVERED.

This Article identifies the U.S. and Ukrainian taxes to which the Convention applies.

In the case of the United States, the Convention applies to the Federal income taxes imposed by the Internal Revenue Code, but not including the accumulated earnings tax or personal holding company tax (which are considered penalty taxes) or social security taxes. It also applies to the excise taxes imposed with respect to the investment income of private foundations. The non-discrimination provisions of Article 25 apply to all taxes imposed at all levels of government. - It is the only article that applies to state and local taxes. The exchange of information provisions of Article 27 apply to all Federal level taxes, including estate and gift and excise taxes to the extent that such information is relevant to enforcement of the Convention or of any covered tax as long as such tax is applied in a manner that is not inconsistent with the Convention.

In the case of Ukraine, the Convention applies to the taxes on profits and income provided by the enumerated Ukrainian laws. The non-discrimination provisions of Article 25 extend to all taxes at all levels of government and the exchange of information provisions of Article 27 extend to all national-level taxes.

Under paragraph 2, the Convention will apply to any taxes that are substantially similar to those enumerated in paragraph 1, and that are imposed in addition to, or in place of, the existing taxes after March 4, 1994 (the date of signature of the Convention). In recognition of the fact that the Ukrainian tax system is evolving, the paragraph adds that a subsequent tax imposed by one State that is substantially similar to an existing tax of the other State covered by paragraph 1 will also be covered. For the same reason, paragraph 3 also includes in the Convention's coverage any national level tax on property subsequently imposed by either Contracting State.

Paragraph 2 also provides that the U.S. and Ukrainian competent authorities will notify each other of significant changes in their taxation laws that are of significance to the operation of the Convention, including changes that deny or have the effect of denying deductions for interest, wages and other significant business expenses.