Ukraine joins the international system of financial data exchange. What does this mean?

13.04.2023 0 By NS.Writer

Ukraine joins the international system of automatic exchange of information on financial accounts (CRS reporting standard). The relevant law was recently adopted in the parliament. What this will mean for Ukrainian users of banking services here and abroad — AIN.UA asked at lawyers.

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What kind of project is this?

The project implements in Ukraine two international standards for information exchange for tax purposes: Common Standard on Reporting and Due Diligence for Financial Account Information (CRS) and the standard for information exchange on request (EOIR).

CRS requires implementing countries to automatically collect account data from financial institutions and to share such information annually with partner jurisdictions. In particular, the CRS obliges financial institutions of participating countries to check accounts and their owners, and identify tax residents of other information exchange partner countries.

"Information about such accounts is submitted by financial institutions to the tax administration of the participating country. The specified tax administration will further send information about financial accounts to jurisdictions in which the owners and persons controlling the owners of the financial accounts are residents," the explanatory note reads.

What it will mean for users

AIN.UA asked lawyers to explain what this draft law will mean for users of Ukrainian banks. Yurii Kryukov, a senior lawyer at Takser, explains what possible changes will occur after the project comes into effect. We quote his comment below (we highlighted the most important in the text):

When the law is fully operational, Ukrainian financial institutions will automatically exchange information with foreign ones about open accounts and their owners (the information to be exchanged includes personal information about the account holder (name, identification number, address, etc.) and his tax residency, the balance of funds at the end of the year, the total amount of funds credited to the account during the year, etc.).
What does this mean for Ukrainian FOPs and citizens of Ukraine? The lawyer notes that now it is possible to open an account abroad and there is no need to inform anyone in Ukraine about it. When an account is opened in a Ukrainian bank, the bank itself sends a tax notification about opening the account. Thus, the tax office at least knows about the number of accounts, so during the inspection it will not be possible to simply "forget" about any of them. But the tax office knows almost nothing about foreign accounts. But, after this standard of exchange of information about accounts is fully operational in Ukraine, information about accounts abroad and foreign income (and assets) will appear in the Ukrainian tax office.
As for the accounts of Ukrainians abroad: Ukrainian financial institutions will have to transfer abroad only data on foreigners with accounts opened in Ukraine. They will not transfer data about Ukrainian citizens abroad.
More than 100 countries have joined this standard and they will all automatically exchange information. Foreign banks will provide account details only if the owner is a resident of Ukraine. But, the lawyer notes, the automatic exchange probably will not apply to all citizens of Ukraine. After all, each country can independently set the minimum amount on the accounts that are checked (most often the minimum amount is $250, but it can be less).
This standard will work in Ukraine no earlier than 2024 or 2025, and only after the abolition of martial law in Ukraine. And as long as Ukrainian banks do not provide information about the accounts of foreigners, the Ukrainian tax office will not receive information about the accounts of Ukrainians abroad.

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