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Ukraine ratified the Agreement between the Government of the United States of America and the Government of Ukraine

International Tax Compliance

On 29 October 2019 the Parliament of Ukraine ratified the Agreement between the Government of the United States of America and the Government of Ukraine to Improve International Tax Compliance and to Implement FATCA (“Agreement”).

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oleksandr-boboshko

Director, Tax & Legal

KPMG in Ukraine

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The Agreement shall enter into force on the date of Ukraine’s written notification to the United States that Ukraine has completed its necessary internal procedures for entry into force of the Agreement.

In turn, certain draft laws aimed at amending provisions of the following effective Ukrainian legislation to ensure Ukraine’s compliance with the obligations envisaged by the Agreement are still to be adopted:

  • Tax Code of Ukraine No.2755-VI dated 02.12.2010;
  • Law of Ukraine “On Banks and Banking Activity” No.2121-III dated 07.12.2000;
  • Law of Ukraine “On Depository System of Ukraine” No.5178-VI dated 06.07.2012;

Below we have summarized the main obligations taken by Ukraine under the Agreement:

1. Ukraine is obliged unilaterally obtain information about all reportable accounts and automatically exchange respective information with the US;

2. Obligation to collect respective information is to be performed by the reporting financial institutions of Ukraine, duly registered with the US Internal Revenue Service (“IRS”) in which the reportable account was opened;

3. Reportable account is deemed to be a financial account that was opened in the reporting financial institution of Ukraine and is owned by the US citizen or institution controlled by the US citizen;

4. Information to be obtained and exchanged includes the following:

  • the name, address and U.S. TIN (in case of absence the date of birth is to be specified) of the account holder or its controlling person;
  • reportable account number;
  • name and identifying number of the reporting financial institution of Ukraine;
  • the account balance or value as of the end of the relevant calendar year if the reportable account is deemed to be the current one;
  • the total gross amount of interest/dividends and the total amount of income generated with respect to the assets held in the account if the reportable account is deemed to be the custodian one
  • the total gross amount of interest paid or credited to the account if the reportable account is deemed to be the depositary one

5. First exchange of the information is to be made with respect to 2014 and all subsequent years and is to be made before September 30th after the Agreement enters into force.

6. The reporting period for all subsequent information exchange is deemed to be a calendar year;

7. Reporting financial institutions of Ukraine failing to perform its reporting obligations under the Agreement may be subject to IRS 30% withholding from any payments made through the US banking system or banking system of the partner jurisdiction, as well as through the foreign financial institution applying the Agreement.

KPMG recommends analysing the impact of the amendments introduced by the Agreement on your current business activity to identify the following:

  • should your financial account be treated as reportable account under the Agreement?
  • should your legal entity be treated as reporting financial institution responsible for reporting information specified by the Agreement and whether such legal entity is subject to mandatory registration with IRS?
  • verification of the due certification of the reporting financial institution for the Agreement’s purposes;
  • identification of the reportable accounts.

If you are interested in obtaining a detailed advice on impact of the Agreement on your business activity or you have any concerns on application of certain Agreement’s provisions or other international tax issues, we are pleased to schedule a free of charge call with Oleksandr Boboshko, Head of International Tax Practice, Director of KPMG in Ukraine.

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