Tax amnesty in Ukraine in 2023

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Tax optimization and tax planning in Ukraine (Digital Nomad)
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Last year Ukraine adopted the Tax Amnesty Law. Today we will elaborate on the following issues: 

  • What is a tax amnesty? 
  • Why is it interesting for taxpayers? 
  • What are the state guarantees? 
  • What assets and within what time frame can be declared? 
  • What tax rates must be paid?
  • What is the procedure for participating in tax amnesty in Ukraine?

So, we’ll talk about everything briefly and in order.

What is tax amnesty in Ukraine?

Tax amnesty is an exemption for individual taxpayers from liability for any violations of tax legislation, which took place before January 1, 2021. In other words, you can declare only those assets and income, which were acquired before that date. Assets that were acquired later, for example, during 2021 and 2022, are not eligible for this campaign. 

Who may be interested in tax amnesty?

Participation in the tax amnesty may be of interest to individuals, because it is an opportunity to legalize income from which previously was not paid taxes by paying a one-time fee at a much lower rate: 2.5% or 5% or 9% (depending on where they have the declared asset – in Ukraine or abroad), compared to the standard rate of 18%. 

It is also an opportunity to start making a history of the source of funds, which is now very relevant. With each passing day the controlling authorities put more and more persistently the following question: Where did the money come from? Not answering it, or answering it “in a streamlined way”, is no longer possible. 

In return, the state guarantees that criminal cases will not be initiated (on the fact of tax evasion), no fines will be imposed, the source of funds does not need to be confirmed, and that the information provided in the declaration will not be subject to disclosure. 

Thus, today the tax amnesty can ensure:

  • legalization of income, including foreign assets (without explaining the source of origin of such income);
  • formation of the history of source of origin of funds for the purposes of the Ukrainian state authorities and especially foreign banks;
  • application of a much lower rate of personal income tax (5% for assets in Ukraine / 9% for foreign assets / 2.5% for those willing to invest in government bonds) compared to the normal rate (18% + 1.5%)  
  • exemption from paying other taxes on declared assets (military tax, unified social contribution, etc.)
  • closure of all proceedings (administrative, criminal), the purpose of which was to find “amnestied assets”.

Why is tax amnesty interesting to the state?

The state is interested in this campaign because it is the easiest and most linear way to supplement the state budget. Especially in these difficult times that we are experiencing right now. 

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Who can take advantage of tax amnesty in 2022?

Tax residents of Ukraine as well as non-residents may participate in the tax amnesty campaign if they received any income and assets in Ukraine during their tax residency in Ukraine. Civil servants are not eligible to participate in this campaign.

Absolutely any assets may be declared: 

  • movable and immovable property; 
  • shares; 
  • intellectual property rights; 
  • monetary assets;
  • rights of claim, etc. 

Regardless of where they are located: in Ukraine or abroad. The only exceptions are probably cash, as well as assets and income with the source of origin from Russia. 

What taxes shall be paid under the tax amnesty campaign?

Depending on where the asset is located, the following one-time tax rate will apply: 

  • for assets located in Ukraine, the rate will be 5%;
  • for assets located abroad, the rate will be 9%. 

And only if you are willing to invest in domestic government bonds, you can count on the application of 2.5% (the lowest rate). 

There is no need to transfer assets to Ukraine before declaring. If you have funds on a foreign account, they do not need to be transferred to an account in a Ukrainian bank – you may keep them on the account in a foreign bank. 

However, if you want to pay tax at a lower rate (5% instead of 9%), then you have to transfer the asset. And this must be done in advance, before the submission of the declaration. You must also attach a certificate from the bank, testifying the transfer of money into the account. Our lawyers help in organizing this process if it is really the best solution in your case.

To determine the tax, the purchase price of the asset is usually taken into account (for most types of assets). 

The tax shall be paid within 30 days of filing the declaration. 

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Is it mandatory to participate in the campaign? 

No. Absolutely not. It’s voluntary, and if desired. However, if the tax office then discovers that a person’s income and assets exceed the established “limits”, this will cause problems (because they will be deemed to have been acquired in violation of the law, i.e., without paying taxes). 

The “limits” are as follows: 

  • UAH 400,000 in cash; 
  • for real estate: 120 sq. m apartment, 240 sq. m house, 60 sq. m commercial premises;
  • 1 car (except cars for transportation of 10 and more persons, cars with cubic capacity over 3,000 cc. and/or those that cost more than UAH 400,000, motorcycles with cubic capacity over 800 cc, planes, helicopters, yachts, boats).

In other words, the legislator “forgives” only UAH 400,000. Anything over this amount is considered undeclared income.

The period for participation in this campaign was originally set from September 1, 2021 to September 1, 2022, but there is a great deal of probability that this period will be extended, because it was impossible to declare assets because of the war. 

Our company offers:

  • Analysis of assets ownership structure and acquisition history to determine if it makes sense for the client to participate in a special declaration campaign;
  • Determination of the assets to be declared;
  • Performing actions that need to be taken before filing a special declaration (opening accounts in Ukrainian banks, transfer of funds to accounts in Ukraine, support of the transaction for the purchase of domestic government bonds, etc.);
  • filling in and assistance with submission of the special declaration, tax calculation and control over its payment and receipt by the tax authorities.

We will be happy to help you determine the assets that are eligible to participate in this campaign, as well as help with declaring and calculating tax. 

Please click here to see the consultation fee.

Everything about tax optimization in Ukraine here.

Publication date: 19/08/2022

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