Tax amnesty: legalization of unofficial income

In order to legalize money received by taxpayers and for which taxes were not paid in the past, the state introduced a tax amnesty mechanism.

The tax amnesty and the one-time declaration of income in it is a legal way to legalize previously received money and avoid liability for non-payment of taxes for them in the past.

The tax amnesty covers income and assets acquired during any period before January 1, 2021, with funds not previously declared under tax or currency laws.

Assets are considered to be cash, property and property rights of declarants of individuals – i.e. citizens of Ukraine and foreigners residing in Ukraine and, respectively, tax residents of Ukraine at the time of acquisition of assets.

As part of the tax amnesty, the tax authorities will not check the source of origin of the assets specified by the declarant in his/her one-time declaration.

Every year, the control with confirmation of the origin of funds used by individuals (in particular, within the framework of business activities or purchase of movable/ immovable property) through financial monitoring mechanisms increases.

Therefore, a one-time tax declaration will allow legalization of previously untaxed money and its further use in economic activities or other activities of a private nature.

The deadline for submission of applications for legalization of income received earlier is till March 1, 2023.

Further details about the procedure for declaring property under the tax amnesty.

For whom

– Individuals who reduced tax liabilities or avoided paying some taxes (received wages in envelopes, income on international freelance resources or through international payment systems, which are not registered in Ukraine);

-Persons who conducted business activities without state registration;

What to declare

– Cash assets

Cash (in national or foreign currency) should be placed on special accounts in Ukrainian or foreign banks. Cash can be declared only after converting it into non-cash form.

– Property

As of the date of completion of the declaration campaign, property must be in the ownership of the declarant, regardless of the sources of income confirming their acquisition.

Not subject to declaration:

– immovable property – apartments up to 120 sq.m.; houses – up to 240 sq.m.; non-residential premises – up to 60 sq.m.; land plots up to 2 ha;

– movable property – one vehicle of non-commercial use. The exceptions are airplanes, helicopters, yachts, motorboats, motorcycles with an engine over 800 sq. cube, and cars with an engine over 3 thousand sq. cube or with a value over UAH 400,000, as well as vehicles for carrying 10 persons or more, including the driver.

– other property

Other property, including land plots and objects of unfinished construction, whether in Ukraine or other countries, is subject to declaration, if the declarant has no documents confirming the income for their purchase.

– securities, investments

Shares, bonds, corporate rights and other financial instruments confirming the right to receive dividends, interest or other property benefits, including beneficiary rights in respect of foreign companies, partnerships, foundations, trusts and other structures are subject to declaration in the absence of confirmed income on their acquisition.

Tax declarations are not subject to assets whose total value does not exceed UAH 400,000 as of the date of completion of the declaration period.

Taxation

The tax rate for declaring property and funds is 5%. In the case if the funds are in accounts in foreign banks, the tax rate is 9%.

If the declarer buys government bonds with a term of at least 1 year without the right to early repayment, the tax rate will be reduced to 2.5%.

Procedure for a lump-sum tax return

  1. Opening a special account with the declaration

Before opening an account and depositing the funds, the bank must conduct a proper verification of the declarant in accordance with the regulations on financial monitoring. During financial monitoring, the bank establishes the sources of origin of the funds to be declared, and then opens a special account.

Within 60 calendar days after depositing the funds in the special account, they are verified.

Funds are deposited through the bank’s cash desk in cash. The bank also charges a bank commission for depositing funds (for example, in Privatbank JSC the commission is 0.5%).

After going through the procedure, you can transfer the funds to your other account or withdraw them in cash.

It is also possible to declare funds, which are placed in accounts in foreign banks or financial institutions. To confirm the location of such funds, you need to get a relevant certificate or an account statement.

  1. Filing a tax declaration

In order to submit a lump-sum tax declaration under the tax amnesty, a person must submit such a declaration to the tax authority via the electronic taxpayer’s cabinet.

After filing a tax return within 60 calendar days, the tax authority conducts a desk audit of the information submitted by the declarant. During this check, the tax authority verifies the state registration of the declared movable/ immovable property.

  1. Payment of tax

The tax should be paid within 30 calendar days from the date of submission of the declaration or in installments within 3 years: the first installment within 30 days from the date of declaration, the second – until May 1, 2024, and the third – until May 1, 2025 (the tax rate increases in installments).

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