In 2023, Ukraine wants to start the international exchange of financial information according to the CRS standard. In August 2021, the Prime Minister of Ukraine, Denys Shmyhal, made an official statement about this at the Global Forum of the Organization for Economic Cooperation and Development. And the state announced its desire to join the CRS back in 2017.
With draft Law No. 5600, "On Amendments to the Tax Code and Some Legislative Acts of Ukraine on Ensuring the Balance of Budget Revenues," the government plans to launch CRS information exchange in Ukraine (David Arahamia and Danylo Hetmantsev announced).
How CRS will work on an example:
Andriy is a tax resident of Ukraine and has an account in a Swiss bank. Andriy did not declare income on the account and therefore did not pay taxes in Ukraine. The Tax Service of Ukraine does not know about the account in Switzerland. The Bank of Switzerland does not monitor Andrii's tax payments in Ukraine. CRS exists to avoid such situations. As part of the exchange, information about the balance of funds in the account abroad will be automatically transferred to the State Tax Service of Ukraine.
The tool was developed in 2014 but started working in 2017. At that time, 49 countries exchanged information. By the end of 2021, the CRS had already operated in 112 states.
According to the Organization, in 2019, about 100 tax authorities of different countries exchanged data on 84 million accounts. The total amount of assets was about 10 trillion euros.
If a Ukrainian keeps money abroad and does not pay the appropriate taxes, the State Tax Service learns about it. It has the right to bring administrative, financial, or criminal responsibility.
In turn, Ukrainian banks and financial companies will send information to foreign tax authorities about foreigners who have accounts in Ukraine.
How CRS will affect individuals:
It will be difficult for Ukrainians to hide undeclared money in countries where CRS operates. And situations like Pandora Papers will occur less and less.
The individual will send the account information, regardless of how much money is in the account. Any amount in the account automatically constitutes interest for the CRS exchange.
CRS divides the accounts of individuals into two categories:
Small accounts - the balance at the end of the year is not more than $1,000,000
Large accounts – the balance at the end of the year exceeds $1,000,000
The exchange takes place in both cases. But on the condition, that information about the owners of large accounts is provided as a matter of priority.
How CRS will affect business:
The exchange will occur not only on personal and corporate accounts. The tax office will establish that the resident owns a foreign company and the amount of the remaining funds in its account.
But there are nuances; for example, information about legal entities whose account is less than $250,000 by the end of the fiscal year will not be automatically sent.
Suppose a Ukrainian has not reported the presence of a CIC (controlled foreign company) as part of a bilateral exchange. In that case, the State Tax Service has the opportunity to obtain this information on its own.
Solutions offered by Icon.Partners:
By the end of 2021, everyone must resolve the issue of personal accounts . It is worth checking yourself for compliance with residency criteria, making a checklist of all existing accounts, and analyzing the possibility of applying CRS exchange to your situation.
Then make a balanced decision about restructuring or moving savings to another state.
For corporate accounts, conduct a comprehensive examination, and analyze the business structure and new declaration rules. Update the country's existing information regarding the CIC laws, which are closely related to the CRS. It will help to develop effective ways to optimize the business, minimizing possible loss or damage from CRS.
Conclusion
Tax evasion is a problem of the 21st century. Long before the CRS exchange, countries implemented similar mechanisms, but the standard built a well-established global system. Governments want to return the money hidden offshore to the "historical homeland" after receiving appropriate taxes. Ukraine is no exception.
Think about the future of accounts today.
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