Automatic Exchange of Information under CRS and CbCR Standards

On 26 June 2024, the State Tax Service of Ukraine (“STS”) informed that the Global Forum of the Organization for Economic Cooperation and Development (“OECD”) has approved the Report on Maturity of Information Security Management System in Ukraine. Practically, this fact confirmed that Ukraine is technically ready to exchange the information, has relevant access controls, privacy/risk management and cybersecurity measures in place.

It was the final requirement for connecting Ukraine to the CRS («Common Standard on Reporting and Due Diligence for Financial Account Information») and CbCR («Country-by-Country Reporting») systems, and thus start the automatic exchange of information. Therefore, we expect that STS will soon gain information on the status of Ukrainian resident’s foreign bank accounts and CbC reports of multinational enterprise groups (“MNE Group”).

What does the CRS exchange entail and who may be affected?

The CRS is an international standard that requires the implementing countries to collect and automatically provide partner jurisdictions with information on the status of financial accounts of non-resident individuals/legal entities, as well as legal entities with non-resident ultimate beneficial owners (“UBO”). Such information includes:

• Names, addresses and tax identification numbers of taxpayers, dates and places of birth of the reportable persons.
• Reportable account number.
• Name and tax identification number of the financial institution.
• Account balance or value as of the end of the relevant reporting period or, if the account was closed during such year or period, as of the date of account closure.

In Ukraine CRS was implemented by the Law on Amendments to the Tax Code of Ukraine (“TCU”) No. 2970-IX, which came into force on 28 April 2023. Ukrainian financial institutions are already collecting the aforementioned information.

The list of jurisdictions with which Ukraine intends to exchange information on reportable financial accounts has already been published on the STS website and includes Cyprus, the UAE, the UK, Estonia, Austria and other countries. The first exchange of information is scheduled to take place on the following dates:

• 30 September 2024 – information on new accounts opened after 1 July 2023 and high-value accounts of individuals (accounts of individuals with a balance or value exceeding USD 1 million as of 30 June 2023).
• 30 September 2025 – information on lower value accounts of individuals (less than USD 1 million as of 30 June 2023) and accounts of legal entities with a balance or value exceeding USD 250 thousand as of 30 June 2023.

Information received through CRS system may be used by the Ukrainian tax authorities primarily for the following purposes:

• Taxation of personal income received on foreign accounts, but not declared in Ukraine, and
• Application of controlled foreign companies (“CFC”) rules, as tax authorities will be able to obtain information on the CFC’s controllers through the accounts of beneficiaries.

It should be noted that, in accordance with the TCU provisions, information on foreign financial accounts of a Ukrainian citizen may not be used to determine the amount of tax liabilities if the aggregated balance or value of all financial accounts held by one Ukrainian citizen does not exceed the equivalent of USD 250,000 as of 31 December of the calendar year falling within the period of martial law in Ukraine.

Furthermore, the list of countries with which Ukraine will exchange information depends on relevant bilateral agreements between Ukraine and such countries. Since not all countries exchange information with each other through the CRS system, it is worth checking with each individual country whether it will join the exchange procedure.

Is it required to file a Country-by-Country Report (CbCR) in Ukraine?

The CbCR is a type of transfer pricing documentation that must be filed if the total consolidated revenue of relevant MNE Group for the financial year preceding the reporting one is equal to or exceeds the equivalent of EUR 750 million.

Although the STS has received a positive assessment from the OECD Global Forum, the Multilateral Competent Authority Agreement on the Automatic Exchange of Country-by-Country Reports (“MCAA CbC”) has not yet entered into force. For this to happen, at least one jurisdiction must consent to exchange information with Ukraine under this agreement. With this, Ukrainian resident taxpayers are currently not required to file CbC reports in Ukraine.

At the same time, the first reporting year will be the year in which the MCAA CbC enters into force. Since Ukraine’s intention is for the agreement to enter into the force soon (there is a commitment to start automatic exchange of information in September 2024), it is advisable to monitor its status on a regular basis, since 2024 may be the first reporting period for the purposes of CbC reporting.

We continue to monitor the latest developments and relevant implementation practice. Our team will continue to share useful information with you.

Comments of Deloitte experts provided herein are for informational purposes only and should not be relied upon by taxpayers without a detailed expert analysis of the specific matter.

At the same time, we will be happy to help you as regards the topic of this alert, in particular:

• Assist with peculiarities of collecting and submitting information in accordance with the CRS requirements.
• Advise on reporting risks that may arise in respect of financial accounts opened with both banks and payment systems (e.g., Wise, Pioneer, Revolut).
• Assess whether the company has any CbC reporting obligations and advise on further steps.

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