Published 22 September 2021. Some rules have changed since; ask us for the current position.
In early September the Ministry of Finance of Ukraine announced plans to introduce automatic exchange of financial and tax information in line with the international AEOI standard (Automatic Exchange of Information) and the CRS (Common Reporting Standard).
Such systems are regarded as modern and effective tools. Officials noted that a number of preparatory steps are needed before the system can be introduced, so it is unlikely to start working in Ukraine before 2023.
Automatic exchange is used in more than 100 countries and supports economic development. Introducing it in Ukraine is expected to:
- Bring in additional tax revenue.
- Curb attempts to avoid mandatory charges and payments.
- Improve cooperation between the competent supervisory authorities.
Following the announcement, the Chair of the Global Forum, María José Garde, said the Forum would be glad to welcome Ukraine. The figures also show how well the tool works: in 2019, before the pandemic, tax authorities in 100 countries used it to monitor 84 million accounts holding more than USD 10 trillion in total.
Ukraine’s first steps towards the international standards
In 2017 Ukraine joined BEPS (the OECD/G20 project against base erosion and profit shifting) and committed to the minimum standard: the action plan has 15 points, of which at least 4 must be implemented.
Information exchange was first discussed back in 2014, and the hope is that the system will be up and running by 2023. Automatic exchange covers:
- the banking system;
- financial institutions;
- trusts;
- investment funds and investment companies;
- pension funds and other entities that pool and invest client money;
- insurance companies.
When will the exchange become mandatory?
The changes will mostly affect legal entities, though individuals will be affected too. The new requirements will apply to:
- all accounts of individuals and legal entities, including newly opened ones;
- accounts opened earlier.
As a result, information that used to stay anonymous will become subject to disclosure, in particular:
- personal data of account holders;
- account details, including those of partners who are Ukrainian tax residents;
- certain types of income.
What about liability?
Ukrainian law currently provides for criminal and administrative liability for tax offences and for offences committed in the course of business.
At present, however, the legislation has no rules on liability for breaching the requirements on exchanging financial and tax information, so this gap has to be closed by law.
Several regulations are expected to be improved before 2023.
Most Ukrainian laws already meet the international standards, but the OECD Global Forum review found minor shortcomings, in particular in the disclosure of ultimate beneficial owners. That shortcoming has since been addressed, and the relevant information must be disclosed by 11 October 2021.
Comments