Banking secrecy is no longer a guarantee. The standard for automatic exchange of financial information changes the rules of the game – now countries exchange information about your accounts, which means one thing: the Ukrainian tax authorities will know more than before. What will become known about your accounts and how to protect yourself from fines, Anna Bildiy, a senior lawyer at Inexis, told Mind.
How does CRS work and why is it important for business?
CRS (Common Reporting Standard) is an international system for exchanging tax information between countries, developed by the OECD (Organization for Economic Cooperation and Development).
In other words, it is a global “tax mail”: banks, payment systems and other financial institutions annually transmit account data to the tax country of which the owner or beneficiary is a resident.
More than 100 countries have joined the CRS, including almost all EU countries (Estonia, Lithuania, Latvia, Poland, Cyprus, Malta, etc.), as well as the United Kingdom and Switzerland. Ukraine became a participant in the international exchange in 2024, when the first exchange of information actually took place based on the results of the second half of 2024. This means one thing – already in 2025, Ukraine will receive large amounts of data on Ukrainian entrepreneurs and account holders abroad.
CRS is not a horror story, but a new tax reality that will have to be accustomed to. Let’s consider how CRS works using the example of a Ukrainian bank account in Germany:
Client identification (KYC – Know Your Customer)
When you open an account, banks ask for: full name, date of birth, country of citizenship, tax number, registration address, information on tax residency.
Information collection
Financial institutions in Germany record information about clients who are tax residents of other CRS member countries.
Data transfer to the tax office
A German bank transfers data to the German tax office.
Exchange between countries
The final stage is the transfer of information to the country of residence. In our situation, the German tax office sends information about Ukrainian residents to the State Tax Service of Ukraine.
That’s it – the data has flown away, now Ukraine knows something new about you.
CRS makes previously “invisible” accounts completely transparent, and the Ukrainian tax office will now have access to information about your business and assets abroad. This is not only about control, but also about the grounds for inspections, additional charges and fines.
What does the Ukrainian tax office see (and not see)?
When they say “the tax office finds out everything” – in reality this is not entirely true. It is important to understand what data Ukraine receives through the CRS.
About people:
personal data: full name, date and place of birth, address, citizenship, country of residence, tax identification number (TIN);
account data: number, type, name of the bank / financial institution;
financial information: balance at the end of the year, income (interest, dividends, proceeds from the sale of assets, etc.).
About companies:
information about the company: name, country of registration, registration number, legal address, status of a financial or non-financial institution;
account information: number, type, name of the bank / financial institution;
financial indicators: balance of funds, passive income (interest, dividends, investment income);
information about beneficiaries: if the company is classified as a “passive NFE” (i.e. a passive foreign company), the bank is obliged to transfer the data of all individual beneficiaries (usually if they control more than 25% of the company).
Which accounts are not subject to CRS:
– Corporate accounts with a balance of less than $250,000 as of 06/30/2023 and 12/31/2023 (according to Ukrainian law) – until the balance at the end of any subsequent year exceeds this amount.
Important: there are no exceptions for individuals – all accounts are transferred, even with a minimum balance.
– Pension accounts;
– Estate accounts – accounts opened to hold an inheritance or to manage the assets of a deceased person until the inheritance process is completed;
– Escrow accounts – these are accounts in which funds or assets are stored until certain conditions are met;
– Deposit accounts in connection with replenishment in excess of the amount owed, etc. (related to mortgages or debts).
Let’s imagine that you keep 100,000 euros in an account in Latvia. The Ukrainian tax authority will receive: your name, address, tax number, account details, balance as of December 31, and the amount of income (for example, interest or dividends). And it will not receive the purpose of payments or details of what exactly you bought / sold. But if the amount of funds seems suspicious, then during the audit this data may be requested.
4 international planning mistakes that lead to fines
Ignoring tax residency
You opened a company in Estonia, have a corporate account with Paysera. At the same time, you have a Ukrainian passport, registration, housing, you spend more than 183 days in Ukraine, that is, you remain its tax resident.
A payment institution (even if it is not a bank) is subject to the CRS, and therefore must identify information about the account holder, including his tax residency, to which it subsequently transfers the information.
As a result: Paysera transfers data to the tax authorities Estonia, and that to Ukraine. The State Tax Service had questions: why were these incomes not declared? Additional tax assessments on all incomes, verification as a CFC (controlled foreign company) or recognition of “hidden income” are possible.
Nominee directors and trusts will not save
A company in Cyprus is registered as a nominee director. But the real beneficiary was a Ukrainian. The financial institution still identified the ultimate beneficiary (thanks to KYC procedures). What are the possible consequences: automatic reporting to Ukraine, the obligation to submit CFC reports, the risk of fines for failure to submit.
Company = personal wallet
The founder of a SaaS company paid for housing rent in Spain from a corporate account. For him, it was “convenience”, but for the tax office, it was hidden income of an individual. Possible consequences: additional personal income tax, risk of CIC audit, suspicion of tax evasion.
Dividends “in an envelope” without tax planning
A transfer of 100,000 euros was made from the account of a Maltese company to your own personal card in Ukraine. The dividends were not reflected as officially declared income.
The Bank of Malta, in turn, transferred data on the balance and dividend payments to Ukraine via CRS. As a result, the Ukrainian tax office immediately saw undeclared income. What are the possible consequences: additional personal income tax of 18% + military duty of 1.5%, fines, CIC audit.
How to process international transactions without fines and additional charges?
We talked about mistakes – time for advice from a lawyer that will save you money.
Separate private expenses from company operations
Do not use a corporate account for personal needs without proper legal registration (salary, dividends, etc.).
Justify transactions from a business perspective
Transfers without a payment purpose, regular small receipts or payments between related parties may raise questions from the bank or tax authorities. Always accompany large transactions with contracts and explanations for the bank.
Documents – comply with accounting and legal requirements
Regulate decisions on profit distribution (for example, dividend payments) in a timely manner, keep complete and reliable financial statements, and be sure to keep supporting documents. Without this, the transfer can easily be classified as “hidden income”.
With CRS, typical gray business models or anonymity through “denominations” will no longer work. Only proper tax planning will save you, and it is better to work on it before you start. But in practice, better late than never.
