Parliament Extended the Terms of One-Time Declaration of Assets

On September 2, 2022, Law No. 2616-IX entered into force, by which the Verkhovna Rada extended for six months the period of one-time (special) voluntary declaration of assets by individuals – till March 1, 2023.

Previously, such a declaration was supposed to be made by September 1, 2022.

What Is One-Time Declaration?

One-time (special) voluntary declaration is a special procedure for declaration by an individual of assets belonging to him, located both on the territory of Ukraine and outside its borders, if such assets were received (purchased) at the expense of income from which they were not paid or paid not in the full amount of taxes and/or which were not declared.

One of the conditions for declaration is the acquisition of assets during any of the tax periods that took place before January 1, 2022.

Persons who do not take advantage of the opportunity to declare are considered to have notified the supervisory body that they do not own assets received without paying taxes.

Who Can Use One-Time Declaration?

• natural persons – residents, including self-employed persons;
• natural persons who are not residents of Ukraine, but who were residents at the time of receipt (acquisition) of the objects of declaration or at the time of accrual (receipt) of income at the expense of which the objects of declaration were received (acquired).

At the same time, the following persons cannot be declarants:

• persons who, as of September 1, 2021, are minors or incapacitated or persons whose legal capacity is limited;
• persons who, for any period starting from January 1, 2010, perform or have performed public functions in Ukraine (in particular, people’s deputies of Ukraine, high-ranking officials, civil servants whose positions belong to category “A”, etc.);
• persons to whom Ukraine has applied special economic and other restrictive measures (sanctions) in accordance with the Law of Ukraine “On Sanctions”.

Assets That Can Be Declared

The objects of the declaration can be assets owned by the declarant under the right of ownership (including under the right of joint partial or joint co-ownership) and located on the territory of Ukraine and/or outside its borders, in particular:

• currency values ??(except funds in cash form);
• real estate (land plots, residential and non-residential real estate objects, including objects of unfinished construction);
• vehicles and other self-propelled machines and mechanisms;
• other valuable movable property (objects of art and antiques, precious metals, precious stones, jewelry, etc.);
• shares (units) in the property of legal entities or entities without the status of a legal entity, other corporate rights, property rights to intellectual property objects;
• securities and/or financial instruments defined by law;
• rights of a monetary claim, established in writing with a legal entity or notarized in the event of a claim against another natural person;
• the right to receive dividends, interest or other similar property benefits;
• other assets of a natural person.

The following cannot be the objects of declaration:

• assets obtained as a result of the commission of an act that contains signs of a criminal offense,except for offenses related to the evasion of paying taxes and fees, violations in the field of currency legislation and certain violations in the field of protection of economic competition;
• assets belonging to the declarant, in relation to whom a pre-trial investigation or court proceedings have been initiated on the grounds of criminal offenses provided for by Articles 212, 212-1, 366, 367 of the Criminal Code of Ukraine;
• assets that are located on the territory of the aggressor state or have sources of origin from such a country.

If the funds, property or property rights were obtained legally and the corresponding taxes or fees were paid when they were received, it is not necessary to declare them additionally.

In addition, there are assets from which taxes and fees are considered to have been fully paid, that is, they can not be declared. These include, for example, assets whose total value does not exceed UAH 400,000, an apartment/apartments whose total area does not exceed 120 square meters. or a residential building/buildings with an area of ??no more than 240 square meters, which are located on the territory of Ukraine.

Procedure for Assets Declaration

The declarant must voluntarily submit a one-time (special) voluntary declaration to the tax inspectorate at the place of tax registration within the specified period.

Such a declaration is submitted in electronic form through the taxpayer’s electronic account.

The submission of the declaration is accompanied by the payment of a one-time (special) voluntary declaration fee – a one-time mandatory payment, the amount of which is calculated by the declarant independently from the value of their assets, taking into account the rates of such a fee, determined by law.

The amount of the fee depends on the object of the declaration and the chosen method of payment of the fee (one-time payment or installments).

Ukrainian assets:

A rate of 5% s established for currency values ??placed in bank accounts in Ukraine, movable or immovable property, securities and corporate rights located (registered) in Ukraine.

In case of payment of the tax liability in three equal parts, the tax rate increases to 6%.

Foreign assets:

A rate of 9% is applied to currency values ??placed in accounts in foreign banks, as well as to objects of declaration that are located (registered) abroad.

There is an option to pay the fee in three equal installments ata rate of  11,5%.

As an alternative, the taxpayer can purchase medium-term and/or long-term government bonds of Ukraine without the right of early repayment with the payment of a fee at a rate of 2,5% of their nominal value.

Peculiarities of Declaring Currency Values

The most common object of declaration is currency values ??(national or foreign currency).

Please note that funds in national and foreign currencies must be deposited in a bank account on the date of submission of a one-time (special) declaration. Cash funds are not subject to declaration.

For them, the declarant must open a current bank account with a special mode of use.

On September 2, 2022, the Resolution of the NBU Board approved the Regulation on the Procedure for Opening and Maintaining Current Accounts with a Special Mode of Use for the purposes of one-time (special) voluntary declaration.

Note that the bank takes measures to establish the source of funds in national and foreign currencies after they are credited to the declarant’s special account.

Therefore, we recommend in advance to take care of the availability of documents confirming the official income of the declarant in the amount corresponding to the declared amount (salary statements/certificates, declarations of property status and income, declarations of the entrepreneur for past periods, etc.) or other sources of the origin of funds (for example, sales contract, gift, loan, service or performance contract, etc.).

Advantages and Disadvantages of One-Time Declaration

Declarants who pay the one-time fee in full are guaranteed:

• exemption from liability for non-payment of taxes (Art. 212, 212-1 of the Criminal Code), forgery of tax and/or financial reporting documents (Art. 366 of the Criminal Code) in terms of declared assets;
• impossibility of applying measures to ensure criminal proceedings, preventive measures and conducting investigative (search) actions in connection with the acquisition, receipt, use of declared assets on the grounds of criminal offenses provided for in Art. 212, 212-1 of the Criminal Code of Ukraine;
• impossibility of opening proceedings against self-employed persons in cases of administrative offenses for violation of tax and currency legislation.

Another important aspect of voluntary declaration of income is that the tax administration does not check the source of income.

At the same time, the legislation does not contain guarantees of the impossibility of opening criminal proceedings and bringing to criminal liability on the grounds of other crimes – for example, for the legalization of income obtained through criminal means (Art. 209 of the Criminal Code) or for criminal offenses provided for by Art. 191, 358, 366, 205-1 of the Criminal Code of Ukraine;

If it is necessary to place cash funds in a special bank account, the banks, not the tax administration, will check the source of the funds in accordance with the requirements of financial monitoring. In case of suspicion, the funds may be blocked.

In addition, we note that the principle of confidentiality of information contained in special declarations is not absolute. For instance, the information contained in the declaration can be disclosed in cases where it is expressly provided by laws or a court decision.

Regarding assets that are taxed on the difference between the purchase price and the sale price (such as corporate rights), it is important to remember that their declaration does not form the purchase price of the assets. In other words, in the event of their further sale, taxes will have to be paid on their full value, if there is no documentary evidence of the purchase price of these assets.

Lawyers and consultants of K.A.C. Group will help to assess the risks of declaring assets in each individual case and will be happy to provide advice and legal assistance on filling out and submitting a one-time (special) voluntary declaration.