On 29 October 2019, the Parliament of Ukraine ratified the Agreement between the Government of Ukraine and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA (FATCA Agreement).
What does it mean?
On 7 February 2019, Ukraine and the USA signed the bilateral FATCA Agreement. “FATCA” stands for the Foreign Account Tax Compliance Act, a set of US extraterritorial reporting rules for financial institutions aimed at combating tax avoidance by US taxpayers with the use of accounts at foreign financial institutions.
Pursuant to the FATCA Agreement, Ukraine has committed to ensure that:
- Financial institutions operating in Ukraine will be obliged to identify reportable accounts maintained by the US taxpayers in Ukraine (e.g., US citizens, resident individuals, partnerships, corporations, trusts, non-US entities with one or more US controlling persons) and report specific information to Ukrainian financial authority. Such information would comprise the identity of the account holder, the account number, the balance or value, and, for custodial and deposit accounts, the amounts credited to such accounts during the reporting period;
- Ukrainian competent authority will be responsible for collecting and furnishing the USA counterparty with the information regarding financial accounts on an annual basis. Ukraine and the US authorities shall enter into a procedural protocol for automatic exchange of such information;
- The information sharing obligation would apply, subject to certain exceptions, starting from 2014 and going forward. In addition, relevant changes are expected to be introduced into Ukrainian laws and subordinate legislation to facilitate the implementation of the FATCA Agreement. More specifically, such changes should align with the FATCA Agreement the current rules with respect to access to bank secrecy and client identification, introduce the reporting standard for Ukrainian financial institutions, and enhance the exchange of information for the purposes of the FATCA Agreement.
What is next?
The FATCA Agreement shall enter into force after Ukraine notifies the USA on the completion of the domestic implementation procedures, including the signing by the President of Ukraine and the official publication.
Points to remember
Ukrainian financial institutions will be obliged to identify and report to Ukrainian authorities information regarding financial accounts maintained by US taxpayers in Ukraine. Ukrainian financial institutions will update their KYC procedures to ensure compliance with the FATCA Agreement.
At this point, you may wish to consider whether such information, once provided to US authorities, may affect your compliance with US tax law requirements.