Source: UJBL

On 29 October 2019, Par-liament ratified the Agreement between the Government of the United States of America and the Government of Ukraineto Improve International Tax Compliance and to Implement FATCA to comply with international obligations undertaken on 7 February 2017. The main obligations taken by Ukraine are as follows:

• Ukraine undertakes unilaterally to obtain information about reportable accounts and exchange respective information automatically with the U.S. Internal Revenue Service on an annual basis;
• The Obligation to obtain information about U.S. reportable accounts lies within reporting financial institution of Ukraine in which the respective reportable account is maintained;
• A U.S. reportable account means a financial account maintained by a reporting financial institution of Ukraine held/controlled by a U.S. citizen;
• The information to be obtained and exchanged with respect to each reportable account includes the name, address and U.S. TIN of a U.S. citizen; account number; the account balance or value as of the end of the calendar year in question, etc.;

The first information exchange is to be made before 30 September after the Agreement comes into force and shall include information about the reporting accounts starting from 2012. The reporting period for all subsequent information exchange is deemed to be a calendar year.

If the reporting financial institution fails to report, it will be subject to mandatory 30% withholding to be made by the members of the U.S. banking system or other states that have signed the Agreement or banks that have joined the respective Agreement.

Ukraine is currently working on harmonization of its internal legislation with the provisions of the Agreement aimed at eliminating collisions between its internal laws and provisions of the Agreement. Certain draft laws (i.e. Draft Law No. 2102 and Draft Law No. 2103) were already prepared and registered with the Ukrainian Parliament with the aim of enabling banks and other financial institutions to disclose information treated as confidential to Ukrainian state authorities; to introduce a reporting procedure, its stages, scope and sanctions.

It is expected that the respective draft laws will be adopted by the Ukrainian Parliament by the end of 2019. Accordingly, business should analyze the impact of the Agreement on its commercial activity as soon as possible in order to identify whether its account may be treated as reportable accounts under the Agreement or if it is treated as a reporting financial institution under the Agreement obliged to obtain and exchange information to avoid penalties envisaged by the Agreement.

Kateryna Hamretska,  Manager, KPMG in Ukraine