Recently, the State Tax Service announced the completion of the software development process for the international automatic exchange of information on invoices for Common Reporting Standard (CRS) and Country–by–Country Reporting (CbCR).
Let’s do a brief analysis of CRS
As we have already reportedearlier, the first automatic exchange of account information was scheduled for autumn 2024. So, the automatic exchange will still take place, more than a hundred foreign jurisdictions will share data on Ukrainian accounts with tax authorities. The first reporting period for which information will be transmitted begins on July 1, 2023 and ends on December 31, 2023. In the future, the reporting period will be the calendar year.
What are the effects of CRS?
The tax office will be able to detect undeclared income that individuals hold in their foreign accounts. In order for an account to become “accountable” for CRS purposes, a threshold of USD 250,000 has been set for legal entities – until the account balance exceeds this value, information about it will not be transferred to Ukraine. At the same time, the situation is somewhat different with accounts of individuals: there is no minimum threshold, that is, information about all accounts will be subject to exchange.
Given the currency restrictions, many individuals have opened accounts in foreign financial institutions, in particular, to conduct business activities. Unfortunately, as a rule, no one conducts a basic analysis of the consequences of using such an account, and no one checks the financial institution on whether it is accountable in the sense of the CRS standard. If such a financial institution is accountable, individuals, and especially individual entrepreneurs, may face a “surprise” in the form of additional tax liabilities, transfer to the general taxation system. Also, one should not forget about CFC. If a controlled foreign company is passive(you can view the criteria atby referencein the section “Passive non-financial organizations: what’s special?”), and the controlling person of such a company has not filed a CIC notification, tax authorities may impose a fine of up to 805,200 hryvnias.
Conclusion
As we can see, the state will have a real opportunity to monitor the income of Ukrainians, which will make tax evasion impossible. We do not advise evading taxes, but qualified lawyers will help you with how to minimize the tax burden and avoid fines.
Find out how to protect your business.
Get valuable legal advice for your startup or IT project to avoid risks and focus on growth.
