The Cabinet of Ministers of Ukraine recently approved an important bill that could have a significant impact on banking secrecy and tax enforcement in Ukraine. This initiative would grant the State Tax Service (STS) access to information about bank accounts and, according to some sources, potentially also to bank safes held by individuals and legal entities.

Key Point: At present, this is only a bill approved by the Government. For it to become law, it must be passed by the Verkhovna Rada of Ukraine and signed by the President. However, the very fact that the government has approved such an initiative demonstrates the seriousness of the state’s intentions to strengthen control over financial flows.

Why is this being done?
The main goal of the bill is to fulfill Ukraine’s international obligations, specifically under the

Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA CRS): This is a global standard that provides for the annual automatic exchange of information on financial accounts between participating countries to combat tax evasion.

The agreement between Ukraine and the United States to improve tax compliance and the application of the provisions of the U.S. Foreign Account Tax Compliance Act (FATCA): This agreement aims to identify accounts held by U.S. taxpayers at Ukrainian financial institutions.

How will this work (if the law is passed)?
Ukrainian financial institutions (banks, investment companies, etc.) will be required to conduct due diligence on financial accounts.

They will identify accounts belonging to residents of other CRS participating countries (or U.S. taxpayers under FATCA).
Information about such accounts (including account holder details, account number, balance/value, income in the form of interest, dividends, etc.) will be transmitted to the State Tax Service of Ukraine.

The State Tax Service will automatically exchange this information with the tax authorities of the relevant foreign jurisdictions.

An important point for Ukrainians:
This mechanism works both ways! By joining the CRS, Ukraine will also receive information from other countries about the financial accounts of its residents held abroad. This significantly increases the risks for those who have undeclared assets or income outside Ukraine.

What does this mean for businesses and citizens?
Tighter oversight: Significantly stricter oversight of Ukrainian residents’ assets and income abroad is expected.

Declaration Requirements: It is becoming critically important to correctly declare foreign accounts and income in accordance with Ukrainian law (for example, through CFCs—controlled foreign corporations—or when filing the annual declaration of assets and income).

Risks for “gray” schemes: Opportunities to hide assets and evade taxes using foreign accounts are significantly reduced.

Bank safes: Although the bill focuses primarily on financial accounts, the mention of safes in the news indicates a potential expansion of the scope of oversight in the future. It is worth closely monitoring the final text of the law.

Expert advice from the attorneys at Barristers Commercial:
Do not wait until the law is finally enacted. You should take the following steps now:
Conduct an audit of your foreign assets and accounts.
Ensure that your financial structure complies with the requirements of Ukrainian and international law.
If necessary, seek advice on the rules for declaring CFCs and foreign income.

Barristers Commercial has deep expertise in tax, economic, administrative, and international law. We are ready to provide you with qualified legal assistance, analyze your situation, and develop a strategy to minimize risks in light of the new legislative initiatives.

Still have questions? Contact us for a consultation!