Legalization of Foreign Assets within the Legal Framework of Ukraine

In the context of the adopted Laws No. 2692 (implementation of the international standard MLI – control over passive income of non-residents), No. 322-IX, No. 323-IX (automatic exchange of information under CRS, FATCA), No. 466-IX (liquidation of the CFCs), No. 4065 (controlled operations) and Draft Law No. 1232 (tax amnesty) it is absolutely clear that 2021 is the last year of the possibility of tax-free legalization of foreign assets; moreover, it will be the last one to apply the CFC rules and information exchange. It is a unique opportunity to reveal everything! This can be done using a comprehensive product developed by K.A.C. Group specialists.

K.A.C. Group offers its clients individual projects (formal legalization) of foreign assets. They are based on Article 170.13 of Law No. 466-IX, as well as Law No. 4065, which provide for the absence of taxation (with the exception of 1.5% of the military duty) of foreign assets received by a citizen of Ukraine, who is a controlling person of a CFC (controlled foreign company), following the liquidation of the CFC.

The project consists of:

  1. Preparatory stage.

– analysis of information about the client, namely: whether they have the PEP status, whether declarations of property and income were submitted by them and their close relatives, their informational “background” in terms of financial monitoring and AML;

– analysis of information about the client’s assets that they wish to structure;

– determination of the legal status of these assets and other nuances that can be taken into account when drawing up a structuring plan, as well as the legal protection of legalized assets and information about them;

– calculation of financial aspects related to the presence of foreign assets legalized within the legal framework of Ukraine. Receiving income from them in the future, tax payments.

  1. Legalization of foreign assets through the liquidation of the CFC.

– registration of a beneficiary’s ownership right to the shares of the CFC, if previously the shareholders were par values, the appointment of a beneficiary (or a trustee) as a director;

– determination of assets in monetary and non-monetary form, which are supposed to be carried out through this procedure, development and implementation of options for registering assets that are not owned by the liquidated CFC;

– adoption of the decision on liquidation, publication of a notice of the liquidation of the company in press, appointment of a liquidator;

– registration of all assets on the CFC’s balance sheet (cash, corporate rights, securities, real estate, intangible assets, accounts receivable), the value of assets in non-cash form must be confirmed by contracts, expert assessment, stock quotes, etc.;

– preparation of financial statements in accordance with the IFRS (International Financial Reporting Standards);

– audit of the report by a local certified auditor. Its results are drawn up in the form of an auditor’s opinion, prepared as of the date of the adoption of the decision on the distribution of assets in connection with the liquidation of the company;

– the liquidation process ends with the issuance of a certificate of dissolution.

All documents must be drawn up by December 31, 2021, translated into Ukrainian and legalized accordingly. In this regard, it is necessary to objectively assess the moment when it is necessary to start the liquidation process.

  1. Declaration of received foreign assets in Ukraine.

– assistance in drawing up a tax return indicating assets received under Law 466-IX and not subject to personal income tax;

– drawing up a declaration on the exemption from taxation of such income with a description of the assets received as a result of the liquidation of the CFC;

– preparation of an auditor’s opinion according to the International Standard 4400 “Analysis of Income and Property”, and, if necessary, a conclusion on the criteria of financial monitoring by a certified ACAMS expert. These documents will complement the declaration and serve as confirmation of the source of funds;

– economic and legal support of the entire process, including ongoing consultations and communication with tax authorities.

It is evident that, starting from 2022, information on foreign assets will not only be available to regulatory authorities, but there will also be risks of penalties and confiscations. In terms of financial monitoring and AML requirements, assets declared through the method offered by K.A.C. Group are a confirmed source of funds for both government bodies and banks, including foreign ones.

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