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.
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:
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:
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.
Should you need more information, please contact Asters' Senior Associate Pavlo Shovak and Associate Olena Mitskan.