Amnesty for individuals: new opportunities for voluntary declaration of assets and income
Tax & Legal Alert
- Who may apply for the amnesty?
- When may the tax amnesty be used?
- What assets may be legalized through the tax amnesty?
- What taxes must be paid in case of a one-time declaration?
- How can Deloitte help?
On 15 June 2021, the Verkhovna Rada of Ukraine passed the second reading of the draft law registered under the number 5153 on 25 February 2021 (the “Law”), which introduces a so-called “tax amnesty” or “capital amnesty” for individuals. The amnesty allows individuals to legalize their assets previously acquired for untaxed funds by filing a one-time special declaration; the declarant must pay a special fee.
The law provides for certain guarantees from the state: such declarants will be exempt from liability for violations of tax and currency laws, as well as the information from their special declarations will not be used in investigations and/or inspections, etc.
Who may apply for the amnesty?
The tax amnesty may be granted to qualifying individuals, both residents and non-residents, who were Ukrainian residents at the time when they acquired assets or received income.
The tax amnesty may not be granted to individuals who have worked in the public sector since 1 January 2010, minors/underage individuals and disabled persons, as well as to individuals on whom Ukraine has imposed special economic and other restrictive measures (sanctions) in accordance with the Law of Ukraine “On Sanctions”.
When may the tax amnesty be used?
The voluntary declaration will be available within the timeframe from 1 September 2021 to 1 September 2022.
What assets may be legalized through the tax amnesty?
Assets subject to one-time (special) voluntary declaration are listed in the Law and include:
- currency values (including funds in national or foreign currency, except for cash);
- real estate and movable property;
- shares (interests) in the property of legal entities or in entities without a legal entity status, other equity rights, proprietary rights to intellectual property, securities and/or financial instruments specified by the Law;
- rights to dividends, interest or other similar property benefits not related to the ownership rights to securities, shares (interests) in the property of legal entities or in entities without a legal entity status;
- individual’s other assets, including property, precious metals that are not placed in accounts, commemorative banknotes and coins, proprietary rights owned by the declarant or from which the declarant receives or may receive income under a property management agreement or any other similar deed and does not pay a part of the income, which is due to the owner of such property, to the latter.
The law also specifies assets that shall not be subject to declaration. For example, among them are assets obtained from activities containing elements of crime, other than criminal offenses or other law violations related to the evasion of taxes, fees (mandatory payments), a unified social security contribution and insurance payments to the obligatory state pension insurance, violations of currency legislation, and some violations of the protection of economic competition.
What taxes must be paid in case of a one-time declaration?
Within 30 calendar days from the date of submitting the special voluntary declaration, a special fee must be paid as follows:
- 5% – for assets located and registered in Ukraine, including currency values in Ukrainian banks*
- 7% and 9.5% before 1 March 2022 – for assets located abroad (after this date – 9% and 11.5%, respectively)
- 2.5% – for Ukraine government bonds having a maturity of more than 365 days (no early redemption) that were purchased in the period from 1 September 2021 to 31 August 2022*
* A higher rate may be applied, with installment payments in three equal parts. The deadlines for payment of the fee will also be changed accordingly.
The special declaration is subject to desk audit to be performed within 60 calendar days following the day of submission of the relevant declaration.
The above review was prepared based on the analysis of the second-reading text of the Law, published on the website of the Verkhovna Rada of Ukraine. The final text of the Law has not been published yet and may differ from the version of the Law used in preparing this review.
The law has not yet entered into force and is being prepared for signing.
How can Deloitte help?
Deloitte can help:
- analyze transactions performed by individuals with their assets and of the income previously received by individuals for violations of the law, as well as assessment of risks and eligibility for granting the amnesty to a particular person;
- develop an asset declaration strategy;
- with recommendations on how to restructure income flows and the current asset ownership structure to ensure the compliance with the laws of Ukraine; support of the restructuring process;
- prepare a special declaration and all necessary reports and submit them to the tax authorities;
- provide support during a tax audit, in communication with the tax authorities and challenging the special declaration audit results.
If you have any questions regarding the information contained in this alert, please do not hesitate to contact our Tax & Legal professionals.