How could Ukrainian businesses and individuals be affected?
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.