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Ukraine may receive information about foreign bank accounts of its residents in 2023

Ukraine officially committed to exchange information on bank accounts between tax authorities. A relevant press release was issued on 30 August by the OECD, an organization in charge for the global implementation of the "new era" anti-offshore tax policies. Earlier in August, the Ukrainian Government sent an official letter to the OECD expressing its commitment to implement the relevant framework and commence exchange of information by September 2023.

It is not the first time when the country announces its intention to start the exchange (last time it planned to do so by 2020), but now it looks more than just a declaration.

The automatic exchange of information on financial accounts, known among the tax advisors and bankers as the CRS, is a step toward the global tax transparency. It suggests that a financial institution in one country (say, a Swiss bank) which maintains an account for a tax resident of another country (say, for a Ukrainian individual) collects information about the account holder and share this information with the tax office in its own country (Switzerland in the example). The Swiss tax office will then share this information with the Ukrainian tax authority on an annual basis. Such exchange is called "automatic" because Ukraine (in this example) will not be required to make any request to obtain this information. The only condition is that there is an appropriate agreement between Ukraine and relevant jurisdiction.

More than a hundred countries have joined the CRS since its emergence in 2017. In other words, if you are a Ukrainian resident having a foreign bank account, your bank has likely collected all the necessary information about you already (and perhaps continues doing so regularly). However, it has likely not shared this information with its tax office yet because Ukraine is not a part of the CRS and no country has the appropriate agreement with Ukraine.

The commitment to join CRS means that in the near future Ukraine intends to sign and ratify a multilateral automatic exchange agreement which covers many jurisdictions – including, for example, Cyprus, Liechtenstein, Malta, Switzerland, the United Kingdom etc. Once the agreement is in place, Ukraine will have the chance to get the information about its residents' offshore bank accounts from the Cypriot, Swiss, English and many other banks over the world. Importantly, not only the individual accounts will be "reportable", but also (in certain cases) the accounts of companies, trusts, foundations where Ukrainian residents are involved as UBOs, settlors, beneficiaries or likewise.

The upcoming automatic exchange means that the tax authorities are getting a quite powerful tool to identify more data about foreign assets of the Ukrainians. Complementing the controlled foreign companies' rules and recent tax amnesty/voluntary disclosure program, the automatic exchange of information is another important ingredient in the Ukrainian recipe of tackling the offshore tax avoidance and aggressive tax planning.

If you need more information regarding the automatic exchange and its potential impact on your tax affairs, please feel free to contact our tax and private clients partner Constantin Solyar and senior associate Yurii Dmytrenko.

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