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Global exchange of tax information
In the past 2020, a lot of noise was caused by the adoption in Ukraine of Laws No. 322-IX and No. 323-IX, which marked the beginning of the implementation of the principles of automatic exchange of information CRS into Ukrainian legislation. We remind you that the Common Reporting Standard began to be developed in 2013 within the framework of the International Organization for Economic Cooperation and Development (OECD), in May 2014 the OECD Declaration on the Automatic Exchange of Tax Information was approved.
To date, 110 states have officially expressed their readiness to implement the CRS standard, or have already done so. According to the CRS, all financial institutions (banks, investment structures, insurance companies) operating in the territory of the participating countries must collect and transfer information about accounts for subsequent international exchange to their authorities. According to forecasts, Ukraine by the end of 2022 may already conclude agreements on the exchange of information with most of the OECD member countries. After that, all accounts of tax residents of Ukraine, including not only personal ones, but also of controlled foreign companies, will be in the “zone of visibility” of the Ukrainian tax authorities.
It is well known that in foreign economic activity Ukrainian businessmen traditionally use foreign companies as tools for tax and financial planning. In the current situation of the international struggle against incorrect tax competition, control and compliance with the rules of compliance, when it is necessary to consider a huge number of nuances, bizarre “camprachicos” structures often arise. Like an English company with an address in London, with an account in a Georgian bank, where the directors and shareholders are Panamanians, and the beneficiary is from Odessa. In our practice, there were even worse compositions. The most vulnerable point of such structures is a bank account, which is very difficult to open without compliance with the compliance condition (compliance of the company’s activities with its place of registration, servicing bank and other conditions). Therefore, Estonian companies appear with an account in Kazakhstan or Armenia. In this context, the question arises, are there any analogues of CRS between, conditionally, the CIS countries (CIS)?
Within the framework of the countries of the former USSR, if you like, the CIS (CIS) has signed a Protocol on the exchange of information in electronic form between the CIS member states for tax administration (from 2021 it is planned to carry out the exchange on an ongoing basis). In addition, there is an Agreement between the CIS member states on cooperation and mutual assistance on compliance with tax legislation and the fight against violations in this area of June 4, 1999, it was signed, for example, by Belarus, Russia, Kazakhstan, Armenia, Azerbaijan. And it applies to both individuals and legal entities, and also, what is important, not only with respect to their income, financial resources, but also “certain types of property”, which does not yet involve exchange within the framework of CRS. In addition, many countries of the former USSR signed on a bilateral basis Intergovernmental Agreements on the exchange of information on tax issues, the same Belarus has such not only with the CIS member states, but also with Georgia and Ukraine (dated April 13, 1999). In turn, the CIS countries have entered into similar bilateral agreements on the exchange of information with other countries. For example, Kazakhstan signed such agreements with the Cayman Islands, Switzerland and Luxembourg. And Azerbaijan has Singapore and Bermuda. Almost all CIS countries (CIS) have bilateral Information Exchange Agreements with Cyprus, which, in turn, cooperates with more than fifty OECD countries within the CRS framework.
Bilateral agreements on the exchange of financial information each have their own specifics, and in some of them the information and the channels for obtaining it are interpreted quite broadly and go beyond bilateral relations, especially if these points relate to international (non-interstate) obligations, for example, within the OECD framework. The latter have priority over the former. And this is important if we consider the trend in the popularity of banks in Kazakhstan, Armenia, Belarus, Azerbaijan among companies from England, Singapore, Cyprus, the beneficiaries of which are tax residents of Ukraine. There is no living practice in this matter yet, because the global CRS processes are only being launched in 2021-2022. But given the dynamics and consistency of the approach in identifying and subsequent taxation of income at the level of beneficiaries, regardless of their place of origin, an Odessa citizen, whose Swiss company has an account with Azer-Turk Bank, should think about it.