The Ministry of Finance of Ukraine elaborated its Road Map for the implementation of international standards of transparency and exchange of information for tax purposes

On 11 December 2017, the Ministry of Finance of Ukraine introduced its Road Map for the implementation of international standards of transparency and exchange of information for tax purposes.

As a participant of the 2013 Global Forum, Ukraine assumed the obligation to implement international standards of transparency and information exchange for tax purposes, in particular:

  1. Exchange of Information on Request (EOIR Standard) and
  2. Automatic Exchange of Financial Information (AEOI Standard).

Exchange of Information on Request (EOIR Standard)

The EOIR Standard is determined in the OECD Model Agreement on Exchange of Information for tax purposes and explanations thereto, as well as in Article 26 of the OECD Model Tax Treaty on Income and Capital and explanations thereto (the OECD Model Tax Treaty on Income and Capital gave occasion for the adoption of the existing treaties on avoidance of double taxation).

The EOIR Standard will require the creation in Ukraine of the regulatory environment enabling the tax bodies to provide/request/obtain information from its international colleagues in relation to the tax payers’ business activities in other jurisdictions.

The EOIR Standard requires the tax body to provide information on request in connection with the Ukrainian tax residents for the purpose of application (and even enforcement) of the domestic tax laws of other tax jurisdictions or for the purpose of compliance with the provisions of the respective tax treaty.

Ukraine assumed the obligation to introduce amendments into the domestic laws in connection with implementation and application of the EOIR Standard, before expiry of the fourth quarter of 2018.

Such amendments may affect the following aspects:

  • Requirement regarding availability of, and access to, the information on beneficiary owners for all relevant legal entities and structures
  • Requirement regarding the mandatory storage period for information on the owners, including accounting and bank documents
  • Information on the owners and accounting data related to foreign companies
  • Introduction of amendments into Article 26 of the OECD Model Tax Treaty on Income and Capital and explanations thereto (specifically, in terms of the standard related to the group’s requests); and determination of requirements pertaining to the completeness and quality of EOI-requests and replies.

Automatic Exchange of Information (AEOI Standard)

AEOI Standard (elaborated by OECD) requires of the financial institutions to provide their tax bocies automatically with information on the non-residents’ financial accounts; in their turn, the domestic tax bodies should share such information with tax bodies in the country of residence of the account owner, in compliance with the globally approved Common Reporting Standard (CRS).

CRS means legal and technical requirements, which create a complete standardized model of automatic exchange of information on the financial accounts held by non-residents, including information related to the assets and accounts at the banks, insurance companies and investment companies (for instance, funds and certain types of trusts).

Ukraine should introduce amendments into the domestic laws in connection with implementation and application of the АЕOI Standard.

Such amendments may affect the following aspects:

  1. Introduction of reporting and due diligence rules (reporting financial institutions should comply with the legal requirement regarding mandatory commencement of due diligence)
  2. Legal framework for the AEOI Standard:
  • Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Ukraine joined the Convention), treaty on avoidance of double taxation and Model Agreement on Exchange of Information for tax purposes (if they include the 2015 protocol providing for automatic exchange of information); and
  • Multilateral Competent Authority Agreement (MCAA), which is a multilateral framework agreement providing for the standardized mechanism for automatic exchange of information in compliance with the AEOI Standard for tax purposes (Ukraine has not joined the Agreement).
  1. Introduction and adjustment of informational, technological and administrative infrastructure for exchange of information:
  • From financial institutions to a tax body
  • From a tax body to its partners in connection with international exchange (and vice versa, for the purposes of mutual exchange).
  1. Privacy and data protection.

Ukraine assumed the obligation to introduce amendments into the domestic laws for the purpose of implementation of the АЕОІ Standard; such amendments are related to the requirements set with respect to the financial institutions, specifically, their obligation to commence a due diligence before 1 January 2019, in order to ensure fulfilment of the plan, whereby the exchange within the AEOI framework is to commence in 2020.