Documents will have to be kept for five years: the Rada adopted an important law for FLP

FLPs are in for some surprises in 2023. The Verkhovna Rada adopted draft law No. 8131, by which Ukraine implements the Tax Information Exchange Standard upon request. This was reported People’s Deputy of Ukraine Nina Yuzhanina.

““The law provides from the date of its entry into force (from the day following the day of publication of 8131): storage of 5 years of primary documents related to the calculation and payment of taxes; providing information at the request of the regulatory authority is a special request of the tax authority of another country on the transactions of their payer with the payer of Ukraine (under the international treaty for the avoidance of double taxation)”- the message says.

According to Yuzhanina, these rules will apply to all legal entities (profit tax payers, single tax payers of the third group), including non-profit enterprises and organizations.

“Banks, insurance companies, credit unions and other financial institutions (as financial agents) will have to perform a number of procedures to verify non-residents when they open accounts in Ukraine, as well as on existing accounts”- noted the deputy.

Briefly about the terms and procedures:

- from June 30, 2023, all the rules on the automatic exchange of information come into force;
- until December 31, 2023, financial agents are required to register with the regulatory authority;
- from July 1, 2023, financial agents apply due diligence procedures to determine reportable accounts, in particular: until December 31, 2023 - for existing accounts with balances over $1 million. USA; until December 31, 2024 - for existing accounts with balances up to $1 million. USA;
- on July 1, 2024, submission to the tax authority of a report on accountable accounts indicating the balances as of December 31, 2023 (the Ministry of Finance has the right to set a later date);
- until July 30, 2024, conducting a desk audit by the tax authority of submitted reports;
- in September 2024, the tax authority automatically transmits information to 102 countries of the world about the opened accounts of their residents in Ukraine.

Yuzhanina added that similar procedures are carried out by foreign banks and financial institutions when opening accounts for Ukrainian citizens abroad and reporting on them.

“The tax authority (of our country), having accordingly received information about an individual resident of Ukraine on accounts in foreign banks as of December 31, 2023 in the amount of up to 250 thousand US dollars (or 10 million hryvnias), will not have the right to check the sources of their origin and payment of taxes from them (both in Ukraine and abroad). I emphasize that the information will be sent to Ukraine (starting from one dollar, conditionally), but if the martial law in Ukraine as of December 31, 2023 is canceled, then the specified limit on the amount that will be subject to verification will not be act”she wrote.

As wrote, for a citizen of Ukraine conducting business activities with the help of a foreign account as an individual, there is immediately a risk that during the audit the tax authorities can interpret such income as foreign income of an individual. According to the Tax Code of Ukraine, they are taxed at a rate of 18% and we add 1.5% military tax. And not our usual 2% / 5% EP and ERUs, usually paying individual entrepreneurs on a simplified taxation system.

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