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- 14.09.2021Tax Amnesty: How to Declare Cash and Cryptocurrency
Tax Amnesty in Detail
The Verkhovna Rada approved the previously adopted and slightly revised law on tax amnesty.
The main idea of the tax amnesty is a one-time voluntary declaration of those assets and funds that were acquired in the past without paying taxes in Ukraine and/or in violation of currency legislation. By filing such a declaration and fulfilling certain requirements, a person pays a fee to the budget and is released from liability for failure to file a declaration and non-payment of tax liabilities in previous periods, which is expected to bring psychological relief.
In addition to unequivocally positive psychological factors, in theory, the submission of a one-time declaration has an important pragmatic aspect for those who comprehensively plan the future disposal of their assets. The world is changing: banking secrecy is becoming increasingly сonventional, financial monitoring is active in the vast majority of countries, and the number of jurisdictions involved in the international exchange of financial information is growing. Every financial institution and even an accountant you request a consultation from is obliged to check and investigate the origin of your funds. Under such conditions, according to the basic idea of the initiators of the bill, by using the right of one-time declaration, it is possible to simplify the disposal of such assets – such as placing funds in deposit accounts, investing or buying real estate.
This article analyzes the main provisions of the tax amnesty, which assets can be legalized and under what conditions, as well as the final changes to the original bill.
The deadline for submitting one-time declarations has been changed: the new one is from September 1, 2021 to September 1, 2022.
The term of payment of the special fee is 30 calendar days from the submission of a voluntary declaration.
Who Can Use a Voluntary Declaration?
Persons who are tax residents of Ukraine or were tax residents of Ukraine at the time of acquisition of previously undeclared assets/income and had to pay certain tax liabilities, but for one reason or another did not do so.
Undergae children and minors who are fully dependent, as well as persons with limited legal capacity and incapacitated persons cannot be declarants.
A separate category that is not entitled to this declaration is PEP (Politically Exposed Persons). It includes persons who have filed or should have filed declarations in accordance with the requirements of anti-corruption legislation.
Exception is persons who have submitted a declaration for the competition for the selected position, but subsequently did not pass the competition or were not appointed to the position.
What Are the Conditions?
- At the lowest rate of 2.5%, it is possible to declare funds placed in domestic government bonds in the period from September 01, 2021 to August 31, 2022, prior to the submission of the declaration. There is also a condition for such bonds – a maturity of more than 365 days without the right of early redemption.
- At a rate of 5%, it is possible to declare funds or bank metals, provided they are placed in banks of Ukraine. This rate also applies to other assets registered in Ukraine, as well as the right of monetary claim against a resident of Ukraine. Alternatively, a taxpayer may choose a rate of 6% with the payment of the tax liability in three equal installments per year.
- A rate of 9% applies to the currency deposited in foreign bank accounts, other assets abroad, and the right of monetary claim against non-residents.
The bill also allows the declarant to use the “installment” option, i.e., to voluntarily increase the rate by one percent (in the case of a base rate of 2.5%, they can increase it to 3%) and pay the obligation not in one installment within 30 days of filing the declaration, but in three equal installments over three years instead.
It is also worth noting that, when placing funds in bank special accounts for voluntary declaration, the bank takes measures to establish the sources of these assets in cases provided by law in the field of financial monitoring, having credited them to a special account of the declarant.
One vulnerable aspect in capital amnesty discussions concerning corruption risks is the doubt whether this option will allow unscrupulous officials to declare corrupt funds. As such, the bill provides for a direct ban on filing a declaration by all persons who were obliged in any year in the period from January 01, 2005 to file declarations in accordance with anti-corruption legislation.
What Assets Are Exempt From Filing a Special Declaration?
1) real estate in Ukraine entered into state registers:
- apartments – up to 120 sq. m (in total) or property rights to such an apartment;
- a residential building up to 240 sq. m (or several buildings of such area in total) or its unfinished construction, subject to ownership of the land;
- non-residential real estate (including unfinished one) for non-commercial purposes up to 60 sq. m;
- land plots within the framework of free privatization;
2) one vehicle that is included in the register (however, sports cars or buses are not included here – exceptions are established for the following: vehicles designed to carry 10 people or more or vehicles with an engine capacity of more than 3.000 cubic cm, or the average market value of which exceeds UAH 400 thousand; motorcycle – 800 cubic cm, plane, helicopter, yacht, boat – all this is otherwise subject to declaration (so far voluntary one);
3) other assets with a total value not exceeding UAH 400 thousand.