How could Ukrainian busi­nesses and in­di­vid­u­als be af­fected?

Kyiv Post Legal Quarterly - - Contents -

When an EU- res­i­dent en­gages a Ukrainian law firm to pro­vide tax ad­vice that falls un­der the re­port­ing cri­te­ria, the EU res­i­dent would be re­spon­si­ble for re­port­ing. The EU res­i­dent would have to dis­close the ad­vice and, no­tably, pro­vide in­for­ma­tion about them­selves and the in­volved Ukrainian busi­ness to its tax au­thor­i­ties. To date, it re­mains un­clear how the in­for­ma­tion thus col­lected will be used by the tax au­thor­i­ties. How­ever, it can­not be ruled out that the EU tax au­thor­i­ties will ex­change the in­for­ma­tion with Ukrainian col­leagues. To il­lus­trate the above­men­tioned, please con­sider the ex­am­ple be­low.

Ukrainian in­di­vid­u­als may also be af­fected by the new rules. This specif­i­cally trig­gers Ukrainian in­di­vid­u­als who have be­come EU tax res­i­dents, as il­lus­trated be­low.

In a sim­i­lar way to the ex­am­ples men­tioned above, the Direc­tive may con­cern Ukrainian busi­nesses that op­er­ate in EU Mem­ber State. For ex­am­ple, an EU sub­sidiary of a Ukrainian com­pany would have to dis­close an ar­range­ment to their tax au­thor­i­ties, should at least one of the hall­marks be present.

As demon­strated above, the new dis­clo­sure rules may shi re­port­ing obli­ga­tions to EU com­pa­nies or even Ukrainian in­di­vid­u­als. As dis­cussed, po­ten­tially re­portable ar­range­ments should be recorded by the af­fected ac­tors and re­ported by 31 Au­gust 2020.

Con­clu­sion In­ter­me­di­aries and tax­pay­ers should gen­er­ally ex­pect DAC 6 to be im­ple­mented into lo­cal leg­is­la­tion of EU Mem­ber States in the near fu­ture. In this con­text, start­ing from 25 June 2018 on­wards, af­fected par­ties should de­velop re­spec­tive poli­cies to en­sure com­pli­ance.

Tax plan­ning will be­come sub­ject to greater scru­tiny by EU tax au­thor­i­ties with all en­tail­ing con­se­quences. With the in­tro­duc­tion of au­to­matic in­for­ma­tion ex­change, the num­ber of tax in­quiries, tax au­dits and, po­ten­tially, tax dis­putes may in­crease.

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