CRS (Common Standard on Reporting and Due Diligence for Financial Account Information) is a global mechanism for the automatic exchange of financial account information between states for tax purposes. Under this framework, financial institutions are required to identify accounts held by tax residents of other participating jurisdictions and annually transmit such information to the tax authorities. The purpose of CRS is to enhance transparency and combat tax evasion.
As of today, 126 countries have joined the CRS Multilateral Competent Authority Agreement, including many traditionally considered “offshore” jurisdictions. Ukraine acceded to the CRS Multilateral Agreement on 19 August 2022, and the first exchange of information took place in 2024 based on the results of the second half of 2023.
This means that Ukraine has begun receiving large volumes of data on foreign accounts of its residents. CRS makes previously “invisible” accounts transparent, which we will discuss further below.
CRS in Ukraine: Legislative Framework and Timelines
Ukraine implemented CRS through amendments to the Tax Code (Law No. 2970-IX dated 20 March 2023). These amendments introduced a new Article 39-3 into the Tax Code of Ukraine, which regulates the rights and obligations of financial agents (reporting financial institutions), their clients (account holders), and the controlling authority (the State Tax Service of Ukraine, “STS”) in connection with the collection of information on financial accounts and the automatic exchange of such information under the CRS Multilateral Agreement. The STS has been designated as the competent CRS authority in Ukraine.
The application of CRS is regulated by Order of the Ministry of Finance of Ukraine dated 26 May 2023 No. 282 “On Approval of the Procedure for the Application of the Common Reporting Standard and Due Diligence for Financial Account Information (Common Reporting Standard)”, registered with the Ministry of Justice of Ukraine on 29 June 2023 under No. 1090/40146. This “Procedure” establishes the rules for collecting information on reportable accounts (as defined under CRS) and due diligence procedures for existing and new accounts of both individuals and legal entities.
In Ukraine, the procedure for submitting CRS reports is governed by Order of the Ministry of Finance dated 25 September 2023 No. 516 “On Approval of the Procedure for Completion and Submission by Financial Agents of Reports on Reportable Accounts in Accordance with the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information”.
Following the entry into force of the amendments to the Tax Code on 1 July 2023, financial institutions were required to begin applying due diligence procedures to all financial accounts. In particular, reporting financial institutions must apply the due diligence rules set out in Sections II–VIII of the CRS Standard to each account and, if the account is reportable, include it in the CRS report.
Tax Residency
A key element of CRS is the determination of tax residency. It should be noted that tax residency is not equivalent to citizenship. Although the rules for determining tax residency vary by country, in most cases the main criteria include:
- place of residence;
- center of vital interests in the country, including personal and economic ties;
- presence in the territory of the country for more than 183 days;
- citizenship and other criteria.
For example, if an individual has a place of residence in a foreign state, such individual is nevertheless considered a resident of Ukraine if they have a permanent place of residence in Ukraine. If an individual has a permanent place of residence in both Ukraine and a foreign state, the individual is considered a resident of Ukraine if they have closer personal or economic ties (center of vital interests) in Ukraine.
If the state in which the individual has their center of vital interests cannot be determined, or if the individual does not have a permanent place of residence in any state, the individual is considered a resident of Ukraine if they stay in Ukraine for at least 183 days (including the days of arrival and departure) during the tax year or periods thereof.
A sufficient (but not exclusive) condition for determining the location of an individual’s center of vital interests is the place of permanent residence of their family members or their registration as a business entity.
If it is impossible to determine an individual’s residency status using the above provisions of subparagraph “v” of subparagraph 14.1.213 of paragraph 14.1 of Article 14 of the Tax Code of Ukraine, the individual is deemed a resident if they are a citizen of Ukraine.
Within the CRS framework, financial institutions will be guided, in particular, by the information provided by the account holder in the self-assessment document. In this document, the individual specifies their tax residency, including their place of residence and taxpayer identification number. In addition, financial institutions use data and documents collected during anti-money laundering (AML) and know-your-customer (KYC) procedures.
Are All Foreign Accounts Reportable under CRS?
Not all accounts fall within the scope of CRS. There are so-called “Excluded Accounts” that are not subject to reporting due to the low risk of their use for tax evasion purposes. These include, in particular:
- pension and retirement savings accounts with restricted access (e.g., upon reaching retirement age, disability, or death), provided that annual contributions do not exceed USD 50,000 and the total limit does not exceed USD 1,000,000;
- long-term insurance policies;
- escrow accounts opened for the transfer of funds to designated persons upon the occurrence of predetermined conditions;
- accounts for the administration of inheritance;
- deposit accounts arising in connection with the refund of overpaid amounts to a client.
Such accounts are recognized as “excluded” if they meet the established conditions. Their common feature is limited access to funds or designated use, which makes them unattractive for tax avoidance schemes.
Separately, an exemption was initially provided for accounts of companies whose balance or value at the end of the reporting year did not exceed $250,000. Such accounts were not subject to reporting until the value of the assets exceeded this threshold. This was a temporary technical exemption, introduced in order to avoid an unnecessary burden on the banking system due to mass inspections.
These are only generalized examples. The full conditions for excluded accounts are set out in the Order of the Ministry of Finance and cover pension, investment and insurance accounts with benefits.
Reportable Accounts
Under the CRS Standard, financial institutions in participating jurisdictions are required to conduct comprehensive due diligence of financial accounts to identify among their holders persons who are tax residents of other partner jurisdictions participating in the exchange of information (so-called “Reportable Persons”). For this purpose, the financial institution applies mechanisms to determine and confirm the residency of the account holder. Accounts held by such Reportable Persons are considered “Reportable Accounts” under the CRS Standard.
The term “Reportable Accounts” includes the following types:
- depository accounts;
- custodial accounts;
- equity or debt interests in certain investment entities;
- cash value insurance contracts;
- annuity contracts.
Thus, for example, if an individual resided for a certain period in another country and is recognized as its tax resident, and this is indicated in the self-certification document at the time of account opening and confirmed by other documents, the Ukrainian tax authorities will not receive information about such an account.
A self-certification document is completed only when opening a new account. If the account already exists, the financial institution will use available data to determine tax residency for CRS purposes, including current residential address, mailing addresses, telephone numbers, and other information that may indicate tax residency.
Criteria for Account Reportability
Financial institutions determine whether an account is reportable under CRS based on certain documents and information. Key criteria include:
- Address information: actual residential address and mailing address of the account holder.
- Contact details: mobile or landline telephone numbers of the account holder.
- Other accounts: bank accounts to which the account holder most frequently transfers funds and the country in which they are maintained.
- Self-certification document: confirmation of residency provided by the account holder in accordance with CRS requirements.
- Certificate of exemption: documentary confirmation that the account holder is not subject to CRS reporting requirements (e.g., if they are a resident of a CRS-participating jurisdiction or not a tax resident of any jurisdiction).
- Other collected data: available documents and information regarding transactions and account status.
- Contractual documentation: a valid banking service agreement or other documents confirming the opening and servicing of the account.
- AML/KYC documentation: information and documents collected under anti-money laundering (AML) and know-your-customer (KYC) procedures.
How Does CRS Operate?
CRS obliges financial institutions in participating jurisdictions to determine the tax residency of their clients and to transmit information on non-resident accounts to the competent authorities. The following are subject to reporting:
- personal accounts of individuals;
- accounts of non-resident companies;
- accounts of companies whose ultimate beneficial owners are non-residents.
The collected data are transmitted by financial institutions to the tax authorities of their respective countries, which annually exchange this information with other CRS-participating jurisdictions.
Accordingly, if a Ukrainian tax resident holds an account with a financial institution in a CRS-participating jurisdiction or is a beneficiary of a foreign company holding such an account, information about such person may be automatically transmitted to the Ukrainian tax authorities.
Which Institutions Report Information under CRS?
Under CRS, reporting is carried out by reporting financial institutions, which include, in particular:
- banks;
- credit unions;
- payment systems;
- electronic money issuers;
- securities and investment market participants (brokers and asset management companies);
- non-state pension funds;
- life insurance companies;
- construction financing funds.
The following are not considered reporting institutions: government bodies, international organizations, central banks, state pension funds, and similar entities.
What Information Is Exchanged under CRS?
The State Tax Service of Ukraine receives from competent authorities of other states information on financial accounts.
With respect to individuals, the following information is transmitted:
- name;
- date and place of birth;
- address;
- jurisdiction of tax residency;
- taxpayer identification number or other identification number.
With respect to entities, the following information is transmitted:
- name and address of the entity;
- jurisdiction of tax residency and identification number of the entity;
- information on controlling persons of the entity: name, address, jurisdiction of residency, identification number, date and place of birth.
Account information includes:
- account number;
- name and identification number of the financial institution where the account is held;
- account balance or value, with indication of currency, as of the end of the calendar year. In the case of account closure, information is transmitted as of the date of closure.
At the same time, it should be taken into account that the scope of information actually transmitted under the CRS automatic exchange may vary depending on the transmitting jurisdiction. Although CRS establishes uniform minimum requirements, in practice the volume and level of detail of transmitted information depend on national legislation, administrative procedures, and technical implementation in the relevant country.
Liability for Violations
As a result of the automatic exchange of information under CRS, the Ukrainian tax authorities may request explanations regarding the source of foreign funds and require declaration of such amounts as income with payment of the relevant taxes. This mechanism strengthens control over the income of individuals holding foreign assets or income and enables more effective identification of undeclared income sources, reducing the risk of tax evasion.
1. Tax Assessment in Ukraine
- Personal income tax – 18%
- Military levy – 5%
2. Financial Liability
- penalties on additionally assessed tax liabilities;
- penalties for late submission of tax reporting;
- accrual of late payment interest.
3. Administrative Liability
- warning or fine, the amount of which depends on the type of violation.
4. Criminal Liability
- fines for tax evasion, the amount of which depends on the amount of unpaid tax.
Detailed Penalty System
Liability of Account Holders
- Intentional submission of CRS self-certification documents containing false information that resulted in failure to identify the account as reportable – 100 minimum wages – UAH 800,000.
- For violations committed before 31 December 2024, these penalties are not applied; for violations committed from 1 January to 31 December 2025, penalties are applied at 50% of the applicable amount.
Controlled Foreign Companies (CFCs) and CRS: Interconnection
The CRS Standard provides Ukrainian tax authorities with access to data on foreign financial assets of residents. Whereas previously the State Tax Service had to submit official requests to foreign tax authorities, since September 2024 it automatically receives information from financial institutions of CRS-participating jurisdictions regarding bank accounts of Ukrainian residents. This exchange provides the tax authorities with information on most foreign accounts of Ukrainian residents and their controlled foreign companies.
Data obtained through CRS will allow the STS to reconcile foreign income and assets with taxpayers’ declarations. The tax authorities will be able to send requests for additional explanations and, if necessary, assess additional taxes based on the new information. Thus, the STS gains an additional independent source of data on the financial position of Ukrainian residents and their CFCs.
All Ukrainian tax residents are required to independently report their CFCs within the established deadlines. In the near future, tax authorities will have access to data on foreign companies and assets of Ukrainian residents; therefore, it is preferable to proactively disclose accurate information on existing CFCs rather than wait for requests or audits by the tax authorities.
Given the current legislative changes and CFC requirements, it is advisable to assess one’s obligations in advance and prepare the necessary reporting. Our lawyers will assist you in understanding the procedure and ensuring proper documentation in compliance with regulatory requirements.
In summary, CRS is a key element of the global tax reform aimed at ensuring transparency and preventing the use of foreign accounts to conceal income. For Ukraine, accession to this standard means not only integration into international rules but also enhanced control over foreign assets of its residents.
Under the new conditions, owners of foreign accounts and companies should pay closer attention to tax planning and timely reporting. This will help reduce the risk of penalties or audits and build a transparent and stable asset ownership structure.
If you wish to prepare for CRS procedures and properly organize CFC reporting, our team is ready to assist with professional analysis and practical solutions tailored to your needs.
