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Consultations on automatic CRS exchange in Ukraine

General information about CRS

(Common Reporting Standard) is a standard for exchanging information between participating countries regarding financial accounts and assets of foreign citizens and residents. This information exchange operates on an automatic annual basis and is based on the principle of residency.

The standard was developed by the Organization for Economic Cooperation and Development (OECD) and is part of the BEPS plan. CRS is designed to combat tax evasion and ensure a more transparent and equitable taxation system. Currently, over 110 countries participate in the CRS exchange system, including all European countries, Asia and most offshore jurisdictions.

In 2023, Ukraine also joined the automatic exchange of banking information and implemented CRS standards into national legislation.

Photo 1 - Consultations on automatic CRS exchange in Ukraine

What you need to know about CRS

According to the standard, banks and financial institutions must provide information about the financial assets of foreign citizens and residents to the authorities of their own country, which will then be transmitted to the client's residence country. This allows the government to monitor the tax obligations of its citizens and reduce opportunities for tax evasion.

Reporting entities under CRS include banks, financial brokers, and insurers.

Please note that payment systems are not always listed as reporting entities under automatic exchange. Each participating country establishes its own list of reporting entities, so this matter should be considered individually by studying each country and payment system.

Procedure for exchanging information on foreign accounts:

  • Reporting financial institutions collect all information about their non-resident clients at the end of the year.
  • This information is provided to the tax authority of the country where the bank or other financial institution is located.
  • The foreign tax authority consolidates the information from all reporting banks by jurisdictions and encrypts it.
  • The encrypted information is transmitted to the tax authorities of the respective resident countries of the account owners.
  • Tax authorities that receive financial information analyze it for potential violations of tax legislation.
Photo 2 - Consultations on automatic CRS exchange in Ukraine

For example, a Ukrainian sole proprietorship has an account in an Estonian bank. Estonia and Ukraine have joined the CRS system, so the Estonian bank is obliged to report the account of the Ukrainian resident to the Estonian tax authorities, who will then transmit this information through annual exchange to the Ukrainian tax authorities. The Ukrainian tax authorities, upon receiving this information, will verify whether the sole proprietorship pays taxes on all its income, including those earned abroad.

Please note that information is exchanged only between participating countries that have concluded bilateral agreements on international tax information exchange.

What information will the Ukrainian tax authorities receive?

As part of the annual exchange of financial information between countries, the Ukrainian tax authorities will receive the following data:

  • Personal information of the account owner
  • Country where the account was opened
  • Bank name, account number, and type
  • Account balance as of December 31 of each year
  • Income (portfolio value of securities, interest income, dividends, interest)
  • Information about the controlling person of the company (country code, tax identification number, full name, date of birth, residential address)

 

Furthermore, financial institutions (banks) will apply enhanced due diligence (comprehensive verification) to all financial accounts and retain relevant documentation for at least 5 years, in accordance with the new Common Reporting Standard (CRS) rules.

Who is affected by the CRS exchange?

Financial information will be collected on individual accounts, entrepreneur accounts, and corporate company accounts. Tax authorities will pay close attention to information about accounts held by Ukrainians who:

  • Have significant balances in current foreign accounts
  • Purchase real estate abroad
  • Invest in the European Union (EU)

 

If an individual or company conducts transparent business operations, has no undeclared income, shadow funds, or undisclosed businesses or properties, the CRS exchange will not practically affect such individuals.

All detected undeclared incomes will be immediately subject to taxation, and additionally, penalty sanctions will be imposed depending on the type of tax obligation that has not been fulfilled. For example, for companies and entrepreneurs, the amount of the penalty may range from 25% to 50% of the unpaid tax.

The first CRS exchange in Ukraine

Since the relevant legislation has already been adopted, the first reporting period for information collection under CRS will begin on July 1, 2023, and will last until December 31, 2023.

Therefore, the first automatic CRS exchange of tax information by Ukraine will take place in 2024, based on which Ukraine will transmit information for the first six months of 2023 and receive information from partner countries for the entire year of 2023.

How to prepare for CRS?

In light of increased requirements for transparency and accountability in foreign business, we recommend undergoing a preliminary assessment of both your personal and corporate assets to ensure compliance with all relevant Ukrainian laws.

Our legal experts have been studying the implementation of automatic exchange of financial information for several years and are ready to offer clients a comprehensive range of consultations, including:

  • Extended analysis of financial accounts;
  • Recommendations regarding the choice of country and financial institution for opening an account;
  • Determination, alteration, and planning of tax residency;
  • Individual determination of information to be exchanged;
  • Identification of untaxed income and recommendations for optimal taxation;
  • Consultations on business restructuring to minimize risks;
  • Recommendations for compliance procedures at banks.

Campio Group will ensure the security of your assets and prepare you for any potential audits. Seek assistance only from professionals: +38098-737-88-88!

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