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Reporting Requirements for Trustees and Trust Administrators in Ukraine

Reporting Requirements for Trustees and Trust Administrators in Ukraine

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Earlier this year, the Ukrainian Tax Code underwent significant amendments with the adoption of Law N 2970-IX. This legislation integrates the Common Reporting Standard into Ukrainian domestic tax law. As part of these broader changes, the law establishes distinct provisions applicable to trustees and trust administrators.

WHAT DOES THIS MEAN?

The law incorporates several key points concerning trusts managed by Ukrainian residents.

Notification Requirement. Both individuals and legal entities residing in Ukraine who manage the activities, assets, or property of a trust, acting as trustees or fulfilling trust administrator duties, are now required to notify the Ukrainian tax authorities about the conclusion or termination of any trust management or administration agreement.

Notification concerning the conclusion or termination of trust management/administration agreements must be submitted to the tax authorities within 30 calendar days of the agreement's conclusion or termination. However, as part of the transitional rules for trustees and trust administrators, their first notifications about the conclusion or termination of such agreements are required within 180 calendar days from the end of the martial law regime established on 24 February 2022.

Documentary and Reporting Obligations. Trustees and trust administrators have an added onus of maintaining a host of records, financial reports, and documents.

  • store and present, upon request, details regarding the settlors, trustees, protectors (if any), beneficiaries, and any other parties who are the ultimate beneficial owners (UBOs) of the trust
  • maintain up-to-date records of all UBOs and the trust ownership structure and provide the tax authorities with them upon request within 10 calendar days of receiving such a request
  • retain and provide separate financial reports concerning the trust and documents confirming such data

Documentation and Translation Provisions. Trustees and trust administrators are obliged to provide certified copies of documents, with Ukrainian translations, upon request by the tax authorities within 30 calendar days. Documents in English, however, do not need a Ukrainian translation. The documents concerning the trust must be retained for at least 1825 days following the reporting period they pertain to, or the termination of the trust or related agreement, whichever is earlier.

Financial reporting. Trust financial reports must adhere to the requirements established by the legislation governing trust activities. If there is no directive on trust financial reporting, the trustees or administrators must ensure separate financial reporting in line with international standards.

NOTE FOR TRUSTEES AND TRUST ADMINISTRATORS

The law's requirements apply irrespective of whether the trust is considered a Controlled Foreign Company under Ukrainian regulations. This means that any trust with a Ukrainian resident as a trustee or trust administrator is encompassed within these provisions. Trustees and trust administrators holding Ukrainian citizenship should be vigilant to prevent inadvertent designation as residents by the Ukrainian tax authorities, who often default to treating all nationals as tax residents in the absence of evidence suggesting otherwise.

While trustees and trust administrators are mandated to notify the tax authorities about trust management or administration agreements, it is crucial to understand two key points:

  • The term "agreement" encompasses a broad spectrum. It could range from a simple one-page trust declaration of individual clauses within a complex contract, to comprehensive written contracts, and might even be constituted through implied actions or oral arrangements.
  • The essence of the provisions within the agreement, rather than its title, is determinative. The substantive content and true intent of the agreement's provisions are of importance.

Hence, it is recommended that all concerned parties thoroughly review their current affairs and agreements to pinpoint arrangements that may fall within the scope of these regulations.

SANCTIONS FOR NON-COMPLIANCE

Ukrainian tax authorities have been empowered to impose sanctions for non-compliance:

  • Failure to Notify. Failing to inform about the conclusion or termination of a trust management or administration agreement within stipulated timeframes will result in a fine of UAH 33,500 (around EUR 870) in 2023.
  • Insufficient Reporting. Not providing or inadequately supplying the financial reports, original document copies, or other information related to the trust upon request will lead to a penalty of UAH 67,000 (approximately EUR 1,740) in 2023.

The fines are calculated based on the minimum salary set by the Ukrainian government and, as such, are subject to change annually. Paying these fines does not exempt the concerned trustee or trust administrator from their obligation to submit the requisite information or documents.

By Pavlo Shovak, Senior Associate, and Olena Mitskan, Associate, Asters

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).

Firm's website: www.avellum.com

 

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