TAX AMNESTY UKRAINE
At the present, the most popular topic in Ukraine concerns tax amnesty and the rules relating to controlled foreign companies. Currently, there is a draft legislation which will provide tax amnesty with the following tax rates: 5% is the general tax rate, 9% is for foreign assets and, 18% is for cash. The Ukrainian Government is planning to complete tax amnesty during the year 2021.
In accordance with the draft legislation mentioned above, it will be prohibited to use the tax declarations applied during a tax amnesty as evidence in Court regarding other cases. The proposed tax amnesty has created number of questions on the part of businessmen and tax advisors.
The taxation amendments of tax residents of Ukraine who own or control foreign companies will take effect as of 1st January 2021.
The effect of such amendments, together with the automatic exchange of financial information which will, be implemented in Ukraine in the year 2022, will not give Ukrainian tax residents the opportunity to hide the fact that they own foreign companies. Some Ukrainian businessmen have already changed their tax residency status. In most cases, Ukrainian businessmen are trying to adopt their corporate structure in order to declare their foreign companies.
The world trend is towards transparency and Ukraine is following such a principle. Ukraine adopted a series of laws surrounding the sphere and tackling tax evasion and at present its legislation complies with the best international practices relevant to this.
It is most probable that, due to the new amendments, some Ukrainian businessmen will liquidate their foreign companies, and the most transparent of these businessmen will continue to use the foreign companies for international business activity and will declare such ownership to the Ukrainian tax authorities.
Below are some important points regarding the rules for controlled foreign companies:
The foreign company shall be considered as a controlled foreign company if the natural person, tax resident of Ukraine or legal entity:
The controlling person is obliged to submit a report on the controlled foreign company, attaching financial statements, to the controlling authority together with the annual tax declaration.
Here at Michael Kyprianou & Co. LLC - Ukraine, we are pleased to offer quality legal services regarding the corporate structure, as well as offering legal consultation on how a business can comply with the new legislation in Ukraine. We have fully fledged offices in Ukraine, Cyprus, Greece, Malta, United Arab Emirates and the United Kingdom.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Dmytro Perevozchykov, Partner at Dmytro.Perevozchykov@kyprianou.com