Volodymyr Zelensky, the president of Ukraine, initiated the Tax Amnesty in February 2021. During the last few months there have been numerous changes and amendments to the first Draft Law. Finally, on June 15th, the parliament of Ukraine approved the Law ?5153 (Hereafter - the Law) with 243 votes. It has several differences when compared with the previous Draft Law.
As we wrote previously, the tax (capital) amnesty?is a one-time government offer for taxpayers to pay a flat or a defined amount of tax in return for being exempted/forgiven from tax liability on previously undeclared income and related criminal prosecutions. The main idea of the Tax amnesty is not to legitimise funds, but to bring taxpayers into the official tax system.
The new Law introduces a one-year voluntary declaration, starting from July 1, 2021, which corresponds to the start of the Bureau of Economic Security. Income sources will not be checked, the declaration can be submitted in electronic form, in person, or via a notary. The opportunity to benefit from the Tax Amnesty concerns only assets that were obtained up to January 1st 2021. Taxpayers can declare certain assets:
- Cash assets*
- Real estate &?land
- Movables (cars,?jewellery, art)
- Shares, derivatives, IP rights
* There are special rules for cash assets. They need to be deposited into a bank account. In such case the rates of the dues to be paid based on such declarations would be as follows:
- 5% - of local bank account deposits and other liquid assets in Ukraine is paid by Ukrainian residents
- 9% - of bank account deposits and other liquid assets abroad is applicable for non-residents of Ukraine
Moreover, it is possible to minimise the tax rate through government bonds. 2,5 % rate will apply for bonds "acquired by the declarant during the period from September 1st, 2021, to August 31st, 2022." Bearing in mind that current weighted average yield of government bonds is 12,59% (as of 15.06.2021), this is the most attractive way to benefit from the tax amnesty.
According to the Law, there are some assets exempted from taxation:
- Ownership or other title to apartments under 120 sq. m
- The house or unfinished construction project with an area of up to 240 sq. m. , provided that the person in question holds the title to the land related to the property
- Other non-commercial real estate with an area of up to 60 sq. m
- Plots of land within the limits of privatization for free
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.