President Volodymyr Zelensky signed the law which ratifies the tax agreement with the United States of America. What are the main points of this agreement, and its consequences for business?
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:
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