Is it necessary to go to the "fiscal" Golgotha? About the risks of tax amnesty

Andrii Spector
Date: 13 Sept , 7:41
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The frequency of capital amnesty instruments has been very high over the last decade. Successful examples are Argentina (2016), Israel (2016 - 2017), Italy (2015, 2018), Indonesia (2017 - 2018) and Turkey (2018, 2020–2021). However, their experience is contradictory.

Problems are especially evident in the countries with high corruption and weak government institutions (no hinting from my side).

On 15 June - 2021, the Verkhovna Rada adopted the Law of Ukraine №1539-IX, which launched the Ukrainian version of the "tax amnesty" as of 1 September - 2021.

According to the apt name of one of the colleagues, in fact it is an analogue of "yevroblyakha for the wealthy" (yevroblyakha is the name of used cars with foreign registration, imported to Ukraine without payment of duty and subsequent re-registration), because assets (including non-commercial cars) worth up to UAH 400,000 do not need to be declared voluntarily at once - they are considered to be fully paid taxes and fees (paragraph 10 of subsection 9-4 of section XX "Transitional provisions" of the Tax Code).

Joking aside, there are concerns about the successful implementation of this idea, as amnesty for foreign assets seems somewhat impractical.

For example, the proposed tax rate of 9% is equal to the current tax rate applied to the distribution of foreign dividends. The statute of limitations for tax purposes in Ukraine is 3 years, so you can not require a declaration from the taxpayer if the tax period has expired.

According to the law, documents confirming the source of income and property should not be submitted. However, taking to the mind the fact that the proceeds of any criminal activity cannot be used for amnesty, it is likely that the tax authorities will require documentary evidence. In addition, the source of income may be questioned by the bank if previously undeclared income has been transferred to a bank account.

It is not logical that the size of the "tax indulgence" depends on a number of factors:

  • geographical location of the asset (in the country - 5%, abroad - 9%);
  • forms of his staying (in the form of medium-term government debt securities - 2.5%);
  • willingness to pay at once or in three installments during each year (3%, 6% and 11.5%);
  • the desire to become a pioneer, making a ransom at the beginning of the zero declaration (from 01.09.2021 to 01.03.2022 at rates of 7% and 9.5%).
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After all, it is not clear at all who the amnesty is intended for, because, for example, this does not apply to the so-called oligarchs. The vast majority of them will not be able to start their financial life "from scratch", because almost all of them have worked in the civil service or been elected to the Verkhovna Rada at various times over the past 17 years, and therefore are not automatically covered by the amnesty law.

But even that is not all. Potential participants in the declaration will have to go through a 60-day in-house inspection by the Tax Service. And in case of violation of the conditions of placement of currency values ​​in banking (or other) financial institutions or the absence / inconsistency of documents confirming the value and location of assets, to get the cancellation of state guarantees and additional tax at a rate of 18%. It is easier not to participate!

And here is another aspect in terms of asset protection. In fact, the law does not contain clear state guarantees of personal safety, reputation and immunity from the fact that the information will be the basis for further prosecution by law enforcement and regulatory agencies, as well as crime. A way out of the situation could be an anonymous declaration mechanism - an impersonal declaration, which was submitted not in person, but through an authorized person - a notary (the algorithm worked perfectly in Israel). Moreover, this exact option was spelled out in the first version of the bill. But the algorithm did not get to the final version, which worsened the situation with guarantees.

It is therefore not surprising that many people do not trust the tax amnesty process, as it threatens the security and reputation of the business. At the same time, I advise those who want to try this version of fiscal indulgence to be especially attentive to the nuances, because the procedure is very individual in terms of the consequences of its application.


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Andrii Spektor

Andrii Spektor

Bankruptcy and Taxation Attorney

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