The Ministry of Finance of Ukraine has updated the Procedure for the Application of the Common Reporting Standard and Due Diligence of Financial Account Information (CRS). The standard takes into account the development of the modern financial system, in particular, the spread of electronic money, central bank digital currencies and financial instruments related to virtual assets.
The relevant changes were approved by Order of the Ministry of Finance of Ukraine No. 316 dated June 15. The updated Procedure will apply from July 1.
The changes are designed to implement the updated version of the Common Reporting Standard (CRS 2.0), approved by the Organization for Economic Cooperation and Development (OECD) in 2023, with the aim of identifying hidden income abroad, combating tax evasion and increasing financial transparency.
The update of the Procedure is another step by Ukraine in fulfilling its international obligations in the field of tax transparency and automatic exchange of information. It ensures compliance of Ukrainian legislation with the latest international standards, promotes the effective functioning of the automatic exchange of information system and brings national legislation closer to the approaches of the European Union, in particular, the provisions of the DAC 8 Directive (in the CRS part).
The updated Procedure expands the scope of application of the CRS and improves the rules of due diligence and reporting for financial institutions, in particular:
– Updated definitions of key terms regarding financial institutions, financial accounts, accountable persons, account holders and certain types of accounts;
– New concepts necessary to take into account modern digital financial products, in particular, certain electronic money products and central bank digital currencies;
– Expanded the scope of application of the CRS to accounts related to the specified financial products;
– The list of information to be established and reported for reportable accounts has been updated;
– The due diligence procedures have been improved;
– The cases where a financial institution has reason to believe that self-certification or documentary evidence is inaccurate or unreliable have been clarified.
CRS is an international system for the automatic exchange of information on financial accounts, the effectiveness of which depends on the synchronous update of national legislation by all participating jurisdictions in accordance with changes approved by the OECD.
The implementation of CRS 2.0 allows us to take into account the emergence of new digital financial products, maintain the completeness and quality of information exchanged between tax authorities of different countries, and ensure the same rules for all participants in the international system.
The implementation of the updated standard confirms that Ukraine is moving in the same direction as jurisdictions that have already updated or are updating their national rules for automatic exchange of information in accordance with CRS 2.0, strengthening integration into the global tax transparency system.
The updated rules create a clear regulatory framework for working with new digital financial products, clarifying approaches to account classification, information collection, self-certification, due diligence and reporting.
For financial institutions, this means clear rules for preparing for automatic exchange of information under the updated CRS standard and reducing compliance risks.
For business, it means greater legal certainty, lower risks of unequal interpretation of legislation, increasing the compatibility of the Ukrainian financial sector with international standards and simplifying interaction with foreign financial institutions and investors.
For Ukrainian citizens, CRS 2.0 does not introduce a new tax or new declaration obligations. This concerns the update of the rules by which financial institutions collect, verify and transmit information on accountable financial accounts within the framework of international automatic exchange. Thanks to this, Ukraine receives better information on the financial accounts of its tax residents abroad, which contributes to increased tax transparency. A financial institution may contact a client only to clarify information or obtain/update a self-assessment document, if this is necessary to comply with CRS requirements.
The update of the CRS Procedure will allow:
– Strengthening international tax transparency;
– Improving the quality of international automatic exchange of information;
– Ensuring that Ukraine fulfills its international obligations;
– Bringing Ukrainian legislation closer to the approaches of the European Union, in particular the DAC 8 Directive (in the CRS part);
– Creating more predictable rules for financial institutions and businesses;
– Confirming Ukraine’s readiness to implement modern international standards in the field of tax administration. (Finance Ministry)