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Ukraine Enacts Law Implementing International Standards for Automatic Exchange of Financial Account Information

Ukraine Enacts Law Implementing International Standards for Automatic Exchange of Financial Account Information

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A new law implementing a wide range of international agreements and standards is aimed at improving global transparency in Ukrainian tax reporting and will have implications for a variety of taxpayers.

On April 20, 2023, the President of Ukraine signed the Law of Ukraine, “On Amendments to the Tax Code of Ukraine and other Legislative Acts of Ukraine on the Implementation of an International Standard for the Automatic Exchange of Financial Account Information,” adopted by the Parliament of Ukraine on March 20, 2023 (the “Law”). The Law takes legal force and effect on April 28, 2023, except for certain provisions that will become effective from June 30, 2023, and January 1, 2024.

The Law implements into Ukrainian law the provisions of a number of international agreements and standards:

  • Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCAA CRS).
  • Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports.
  • Qualifying Competent Authority Agreements entered into by competent authorities of Ukraine and a foreign jurisdiction that are parties to the current international agreement containing provisions on the exchange of information for tax purposes (this provides for the automatic exchange of country-by-country reports of an international group of companies between Ukraine and such a foreign jurisdiction).
  • Qualifying Competent Authority Agreement.
  • Common Standard on Reporting and Due Diligence for Financial Account Information (CRS).
  • Agreement between the Government of the United States of America and the Government of Ukraine to Improve International Tax Compliance and to Implement the Provisions of the Foreign Account Tax Compliance Act (FATCA).

The Law will enable the automatic exchange of financial and tax information—one of the elements of a framework to prevent base erosion and profit shifting (BEPS) that was developed among 135 countries with the OECD/G20— and is aimed at creating facilitated access by competent authorities to such information in order to effectively identify undeclared income of tax residents outside their resident countries and control over the correctness of income declaration and tax payments.

Ukraine will launch its automatic exchange of financial and tax information in July 2023, and in 2024 the tax authorities of participating countries will begin exchanging such information with Ukraine for 2023.

In practical terms, introducing automatic exchanges of information in accordance with he Law means that Ukrainian banks will be obliged to collect information about the accounts of foreign taxpayers in Ukraine and transfer it to the Ukrainian tax authorities that will, in turn, transfer this information to the tax services of the respective countries according to the taxpayer’s tax residency. Ukrainian tax authorities will also receive such information about their taxpayers from the tax authorities of countries that are parties to the relevant international agreement.

In particular, the following information will be subject to automatic exchange:

  • Name/corporate name of the account holder
  • Date of birth, address
  • Tax number
  • Bank account number
  • Balance at the end of the year
  • Total income from financial assets for the reporting period

As the Law obliges reporting for purposes of automatic exchange of financial information from July 1, 2023, Ukraine will be able to transfer such information in 2024 (for the last half of 2023) to other countries that are parties to the relevant international agreement. Ukrainian tax authorities will also be able to receive such information for 2023, possibly for the entire year, depending on when the other CRS member countries begin collecting their information.

For more detailed information about the Law and the possible consequences of its entry into force for you and your business, please contact our tax and financial specialists.

By Igor Davydenko, Partner, Dentons

Ukraine Knowledge Partner

AVELLUM is a leading Ukrainian full service law firm with a key focus on Finance, Corporate, Dispute Resolution, Tax, and Antitrust.

Our aim is to be the firm of choice for large businesses and financial institutions in respect of their most important and challenging transactions.

We build lasting relationships with our clients and make them feel secure in new uncertain economic and legal realities.

We incorporate the most advanced Western legal techniques and practices into our work. By adding our first-hand knowledge, broad industry experience, and unparalleled level of service we deliver the best results to our clients in their business endeavours. Our partners are taking an active role in every transaction and ensure smooth teamwork.

AVELLUM is recognised as one of the leading law firms in Ukraine by various international and Ukrainian legal editions (Chambers, The Legal500, IFLR1000, The Ukrainian Law Firms, and others).

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