KIEV: The Minister of Finance of Ukraine and the US Ambassador to Ukraine signed a treaty to improve the application of tax rules and provisions of the US Foreign Account Tax Compliance (the Treaty).
The Treaty is based on the Model 1B Intergovernmental Agreement as reported by the Ministry of Finance of Ukraine.
The US Foreign Account Tax Compliance (FATCA), effective since July 2014, establishes a number of requirements for foreign financial institutions to undergo special registration with the US Internal Revenue Service (IRS) in order to exercise control over the accounts of US citizens and companies where US persons hold substantial ownership. The information for IRS will be collected on the centralized basis by a Ukrainian state body in compliance with the Ukrainian legislation.
The major benefit of the Treaty is that it grants relief to Ukrainian financial institutions from withholding 30% tax on transit payments to the owners of the accounts – US citizens and companies where US persons hold substantial ownership.
The Treaty still needs to be ratified by the Ukrainian Parliament in order to become effective. The framework of laws and regulations will also need to be developed and adopted in order to make the Treaty fully functional in Ukraine.
The Treaty should serve as an effective tool for combating financial fraud, tax evasion and should significantly improve the exchange of information between Ukraine and the US, as well as ameliorate Ukraine’s cooperation with the US.
