The exchange of information between the tax authorities of Ukraine and the European Union (EU) is part of the BEPS plan. This infrastructure will allow regulatory authorities to quickly identify ultimate beneficiaries as well as citizens’ undeclared income. This will help reduce the shadow economy, as most funds will now be subject to taxation. It is no longer possible to hide income abroad, a practice often employed by unscrupulous citizens.
According to Ivan Marynyuk, an attorney at the law firm “Ilyashev & Partners,” the automatic exchange of information will serve as an additional incentive for the timely reporting of income and payment of taxes in Ukraine. In addition, the new system will ensure full transparency for foreign tax residents who hold accounts in Ukraine. The State Tax Service (STS) will share this information with its counterparts abroad.
At the same time, audits may occur when tax authorities in other countries request data from a taxpayer at the request of the State Tax Service of Ukraine. If undeclared income is discovered, additional tax liabilities may be assessed.
Note that the law will take effect in July 2023. The first automatic exchange of data will take place in 2024 for the first reporting period—from July 1, 2023, to December 31, 2023. It will apply to all individuals, legal entities, and individual entrepreneurs.