Share this post

Print

During the past year, Ukraine implemented land reform, adopted new AML Law, drastically amended its tax system with the new Anti-BEPS Law, introduced CFC rules and created a basis for a new legal framework for the IT industry. These achievements declare Ukraine`s continuous move towards prosperity and financial stability.  

Well-made infrastructure is a significant element of a stable economy. However, each economy needs enough finance to properly fulfil all government responsibilities. According to the Stock market infrastructure development agency of Ukraine (SMIDA), in the 1Q of 2020, the shadow economy level rose to 31% of Ukraine`s GDP (28% in 2019). Ukrainian government understood that the size of the shadow economy increases with the rise of regulations and rules. It is crucial to lure the finance from the shadow economy back. Here is why the Tax amnesty may help.  

The tax amnesty is a one-time government offer to the taxpayers to pay a flat or a defined amount of tax and in return to be exempt / forgive from tax liability on previously undeclared income and related criminal prosecutions. The main idea of the Tax amnesty is not to legitimate funds, but to bring taxpayers into the official tax system. 

During the past year, there were several draft laws with proposals to amnesty previously untaxed income. On February 25, 2021, the President of Ukraine, Volodymyr Zelensky registered four draft laws on tax amnesty in the parliament. If Verkhovna Rada will support the proposal, a voluntary tax amnesty starts on July 1, 2021. According to the Draft Law, all taxpayers will have a year to declare and pay amnesty taxes for certain assets: 

  • Currency (cash, precious metals, deposits, etc.); 
  • Real estate & land; 
  • Movables (cars, jewellery, art); 
  • Shares, derivatives, IP rights.  

Several residents and non-residents will not be able to benefit from the Tax amnesty: infants, disabled, gov. officials (since 2005) and their relatives. Currently, the Draft Law does not include official`s relatives, but it was proposed by the Prime Minister of Ukraine – Denis Shmygal. 

The procedure requires to fill in the declaration and pay the taxes in 10 working days. The rates depend on the type of asset and its location: 

  • 5% rate for funds or other assets located in Ukraine;  
  • 9% rate for funds or other assets located elsewhere; 
  • 2.5% rate if the person invested undeclared assets in government bonds (1 year, without the right of early repayment) despite the location. 

The last way of the Tax amnesty is the most attractive since currently, the National bank of Ukraine declared the weighted average level of profitability at 12%. 

For further information on how you or your business can prepare for the new standards or to discuss your potential actions, please contact our Kyiv Tax and Legal Department at kyiv@eurofast.eu. Remember, Eurofast is here to support your every step. Get in touch with our consultants to obtain a personal plan, support and guidance today!

Eurofast is a regional business advisory organisation employing local advisors in over 23 cities in South-East Europe & Middle East (SEEME). The Organisation is uniquely positioned as a one-stop-shop for investors and companies looking for professional services in South-East Europe & the Middle East

Alex Maistrenko
Tax& Legal Associate
Eurofast Kyiv
alex.maistrenko@eurofast.eu 

12/3/21