Ukrainian FATCA Agreement Authorized for Signature
On November 9, 2016, the Ukrainian government authorized the Ukrainian FATCA Agreement for signature. Let’s explore this new development in more depth.
Ukrainian FATCA Agreement and FATCA Background
The Ukrainian FATCA Agreement is one of the many bilateral FATCA implementation agreements signed by the great majority of jurisdictions around the world. The Foreign Account Tax Compliance Act (FATCA) was enacted into law in 2010 and quickly became the new standard for international tax information exchange.
FATCA is extremely complex, but its core purpose is very clear – increased US international tax compliance (with higher revenue collection) by imposing new reporting requirements on US taxpayers and especially foreign financial institutions (FFIs). Since FFIs are not US taxpayers, the United States has been working with foreign governments to enforce FATCA through negotiation and implementation of FATCA treaties. The Ukrainian FATCA Agreement is just one more example of these bilateral treaties.
Ukrainian FATCA Agreement is a Model 1 FATCA Agreement
There are two types of FATCA treaties – Model 1 and Model 2. Model 2 FATCA treaty requires FFIs to individually enter into a FFI Agreement with the IRS to report the required FATCA information directly to the IRS (for example, Switzerland signed a Model 2 treaty).
On the other hand, Model 1 treaty requires FFIs in the “partner country” (i.e. the country that signed a Model 1 FATCA agreement) to report the required FATCA information regarding US accounts to the local tax authorities. Then, the tax authorities of the partner country share this information with the IRS.
The Ukrainian FATCA Agreement is a Model 1 FATCA Agreement.
When will the Ukrainian FATCA Agreement Enter into Force?
The Ukrainian FATCA Agreement will enter into force once Ukraine notifies the US government that it has completed all of the necessary internal procedures for the ratification of the Agreement.
What is the Impact of Ukranian FATCA Agreement on Noncompliant US Taxpayers?
The implementation of the Ukrainian FATCA Agreement will mean that the Ukrainian government will force its FFIs to identify all of the FATCA information regarding their US accountholders and share this information with US government.
This further means that any US taxpayers who are currently noncompliant with the US tax reporting requirements (such as FBAR, Form 8938, foreign income reporting, et cetera) are now at an ever increasing risk of detection by the IRS and the imposition of draconian IRS penalties.
Contact Sherayzen Law Office for Help With US Tax Compliance in light of the Ukrainian FATCA Agreement
If you have undisclosed Ukrainian assets (including Ukrainian bank accounts) and Ukrainian foreign income, contact Sherayzen Law Office for help as soon as possible. We have helped hundreds of US taxpayers around the globe (including Ukrainians) to bring their US tax affairs in order and we can help you!