CRS information exchange is starting in Ukraine: how you can prepare?

Automatic exchange of tax information with other countries (CRS) starts in Ukraine. Since the relevant laws have already been finalized, it is worth familiarizing yourself with the main details about CRS and how to prepare for the changes in the financial sector.

What is CRS information exchange?

CRS (Common Reporting Standard) is a system for exchanging financial account information between different countries to fight tax evasion. Within the framework of CRS, information on active and passive accounts, income, balances and other financial data is automatically and annually transferred between the participating countries of the exchange. The only condition is the existence of a corresponding agreement between Ukraine and the country where the bank account is opened.

Thus, the purpose of this exchange is to identify untaxed income abroad by reporting it to the account holder’s country of residence, which, in turn, will take appropriate action and impose fines.

What information will be provided?

According to the CRS rules, all financial institutions (banks, investment structures, insurance companies, brokers and others) in the territory of the participating countries are obliged to collect and transmit to their governments information about the accounts of non-residents for international exchange.

As part of the automatic financial exchange, the following data about the non-resident’s account will be transferred:

• account jurisdiction;
• data of the financial institution where the account is opened;
• identification data of the account itself;
• annual turnover or balance at the end of each reporting year;
• investment and passive income;
• personal data of the account holder or company.

The Ukrainian tax service will receive this information regarding all accounts of Ukrainian residents abroad. After that, a thorough check will be carried out to see if all tax obligations have been met with respect to the specified income. If undeclared funds or unpaid taxes are found, fines will be imposed on the account holder and the corresponding tax payments will be required.

First CRS exchange

Ukraine has already prepared everything necessary to start checking and collecting data on accounts opened by non-residents in Ukraine, so the first data collection starts on 01.07.2023 and will last until 31.12.2023. Legislation on CRS has entered into force, so it is necessary to be ready for these changes in the financial sphere today.

Having collected the relevant information, Ukraine will transfer it to partner countries in September 2024 about non-resident accounts opened in Ukraine, and in return will receive information for 2023 about the accounts of Ukrainians abroad. Such automatic exchange will be carried out every subsequent year, where the participating countries will exchange the annual financial information of the account holders.

Note that it is more likely that Ukraine will receive financial information for the entire year 2023 and information on the status of accounts as of December 31, 2023.

Below in the Ministry of Finance table, which accounts in Ukraine will be verified (NP – due verification) as a priority and on which dates the corresponding exchange of this data will take place.

Thus, the first automatic exchange, which will take place in 2024, includes:

• all new accounts of individuals and legal entities opened after 01.07.2023;
• accounts of natural persons opened before 30.06.2023, which have a balance or a value of more than 1 million US dollars.

In 2025, the following data will be transmitted:

• on accounts of companies opened before 30.06.2023, the value or balance of which exceeds USD 250,000;
• on the accounts of individuals opened before 30.06.2023, the value or balance of which does not exceed 1 million USD.

How to respond to these changes?

We inform you right away that it is impossible to avoid CRS exchange. However, it is possible to properly prepare for it in order to avoid unnecessary questions from tax and fine sanctions.

In particular, foreign account holders are recommended to conduct only transparent calculations on their current accounts, to check whether all income received on the accounts are declared, and to conduct an audit of all transactions for the current year 2023.

The primary and greatest attention of tax officials will be focused on accounts with large turnovers, investments and realized purchases of real estate abroad.

In particular, attention should also be paid to  controlled foreign companies  accounts, which will also be carefully checked both for the fulfillment of obligations under CRS and controlled foreign companies legislation (notification of the presence of CFCs, reporting, etc.). We remind you that according to the introduced rules of the CFC, the profit from any foreign legal entity owned or controlled by a resident of Ukraine must be taxed in Ukraine (except in cases of exemption from taxation).

Moreover, we note that since Ukraine has joined the auto exchange, compliance in European banks for Ukrainian residents will now be more detailed and meticulous, so we recommend that you go through these procedures exclusively with the support of lawyers.

It is important to know that all documents and transaction history are stored in financial institutions for 5 years, according to auto exchange standards.

If you need help analyzing your current accounts for readiness for CRS exchange, contact our specialists for an individual consultation.