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Asset Protection Planning

The Newest Member of FATCA

By February 14, 2017December 14th, 2023No Comments

On 7 February 2017, Ukraine’s Finance Minister Oleksandr Danyliuk and the U.S. Ambassador to Ukraine Marie Yovanovitch signed an intergovernmental agreement implementing the Foreign Account Tax Compliance Act (FATCA).

What is FATCA?

FATCA was enacted by U.S. Congress in 2010 with the view to targeting non-compliance by U.S. taxpayers when using foreign accounts.

FATCA requires foreign financial institutions (FFIs) to identify and report to the U.S. Internal Revenue Service (IRS) information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

FATCA is enforced internationally via intergovernmental agreements (IGAs) between the Executive Branch of the U.S. government and foreign governments. By entering into an IGA, the foreign government undertakes to implement the FATCA requirements into its own legal systems and oblige its financial institutions to comply.
There are two distinct Models permitting the IGA implementation of FATCA. Under Model 1, financial institutions report information about U.S. accounts to the tax authority of their own jurisdiction, and the latter provides such information to the IRS. Model 1 may take a form of either reciprocal (Model 1A) or non-reciprocal (Model 1B) exchange of information. Under Model 2, in turn, financial institutions report directly to the IRS while their jurisdiction undertakes to lower any legal barriers to that reporting. Model 2 also comes in two versions: for countries with no Tax Information Exchange Agreement or Double Tax Treaty (Model 2A) and for countries with such treaties in place (Model 2B).

Currently 113 jurisdictions have signed and/or enforced an IGA, or reached an Agreement in Substance to implement FATCA.

FATCA Implementation in Ukraine

Ukraine reached an Agreement in Substance to implement FATCA on 26 June 2014. This allowed Ukrainian financial institutions to register with the IRS as Participating FFIs and fulfil FATCA requirements on a voluntarily basis. Most Ukrainian banks opted to register as Participating FFIs.

By signing an IGA on 7 February 2017, Ukraine undertook to implement FATCA under Model 1B. This implies that Ukraine agreed to centrally share with IRS information on U.S. accounts on a non-reciprocal basis.

According to the statement of Ministry of Finance, it will further initiate the necessary amendments to existing legislation aimed at enabling the smooth and proper implementation of FATCA.

If you have a bank account in the Ukraine, the U.S. Treasury will be receiving information about your bank account(s) located in the Ukraine, but the U.S. will not be sending information about Ukraine citizens’ U.S. bank accounts to the Ukraine. You should now act accordingly to ensure that you are in compliance with U.S. FATCA and Tax reporting and disclosure requirements.

Michael Nelson

Michael has great depth of experiences and skills that evolved from over 35 years of representing international businesses, executives, expatriates and multi-national families. From these years of successful legal representations of CEOs of Fortune 500 Companies to family clients with needs from complex estate planning to international trusts and private foundations. He is committed to his clients, always finding better alternatives or options for his clients. Dedication to the client is synonymous with his name.