The Verkhovna Rada Approved the Implementation of the Multilateral Agreement on the Automatic Exchange of Financial Accounts Information

On March 20, the Verkhovna Rada adopted in the second reading and in general the Draft Law No. 8131 “On Amendments to the Tax Code of Ukraine Regarding the Implementation of the International Standard of Automatic Exchange of Information on Financial Accounts”.

The Draft Law was developed with the aim of implementing the Common Reporting Standard (CRS) and due verification of information on financial accounts, established by the OECD in 2014. The implementation of the CRS Standard is a mandatory condition for Ukraine to join the international information exchange system within the framework of the Multilateral Agreement on the Automatic Exchange of Information on Financial Accounts, to which Ukraine joined on August 19, 2022.

As a reminder, the CRS Standard calls on jurisdictions to obtain information from their financial institutions and automatically share this information with other jurisdictions on an annual basis. It sets out the financial account information that must be exchanged, reporting financial institutions, different types of accounts and taxpayers, and general due diligence procedures that financial institutions must follow.

Key provisions of the Draft Law:

? functions and rights of control bodies are established to ensure obtaining the information necessary for the exchange under the CRS Standard;

? obligation of financial agents to report on registration and obtaining the status of a reporting financial institution;

? obligation of financial agents, during the comprehensive examination of financial accounts, to submit to the State Tax Service information about the financial accounts of account holders who are tax residents of other jurisdictions – parties to the Multilateral Agreement. Requirements for storing information and documents that apply to all financial accounts are also regulated;

? reporting on regulated accounts is subject to internal audit, and errors in them must be identified and corrected within a minimum period of time;

? requirements for monitoring and surveying financial agents have been formed. If risks of non-compliance with the CRS Standard are identified in the activities of the latter, they may be assigned an unscheduled documentary inspection;

? non-residents are required to keep information on their ultimate beneficial owners and ownership structure up to date, update it timely and notify the controlling body of any changes;

? procedure for obtaining information for tax purposes by the controlling body in accordance with the CRS Standard and upon request from the competent authority of a foreign jurisdiction on the basis of the Multilateral Agreement has been established;

? a control mechanism has been established regarding compliance with the requirements of the CRS Standard by financial agents and the imposition of sanctions in the event of its improper compliance and violation, including repeated ones.

The process of implementing the CRS standard is controlled by the OECD Secretariat, whose task is to ensure a unified approach of jurisdictions to its interpretation and application. Ukraine is expected to start applying the standard in practice in September 2024.

Draft Law “On Amendments to the Tax Code of Ukraine Regarding the Implementation of the International Standard of Automatic Exchange of Information on Financial Accounts”