Ukraine is actively strengthening its tax transparency efforts with a distinctive approach to the exchange of Country-by-Country (CbC) reports, built upon the OECD's Action 13 BEPS recommendations.
The first reporting period for the country-by-country report for MNE Groups with a total turnover exceeding EUR 750 million will be the financial year that starts in 2024, with a submission deadline in Ukraine of 12 months after the end of the international group's parent company's financial year.
Notably, as of now, there is still no agreement for the automatic exchange of CbC reports between the US and Ukraine in place; hence, there might be a requirement for the Ukrainian company of the Group submitting a CbC report in the US to submit a CbC report to Ukrainian tax authorities during 2025 for the financial year that started during 2024.
While Ukrainian TP legislation provides certain exemptions from secondary filing requirements in Ukraine, companies should pay close attention to the analysis whether they qualify for the exemptions.
The penalty for non-submission of the CbC report is approximately USD 72,000, and payment of the penalty does not exempt the entity from the obligation to submit the CbC Report.
Ukraine's implementation of CbC reporting adheres largely to OECD standards, but it also features key distinctions, specifically addressing the format and language of the Report. The form of the CbC report in Ukraine is developed and published the XML schema, based on the requirements of the Country-by-Country Return XML Schema approved by the OECD. However, instead of a single, consolidated report, Ukraine requires MNE groups to submit CbC report package, which consist of separate files for each entity and the territory in which it operates. This approach necessitates the creation of multiple files. Adding to this complexity, the regulations mandate that the information contained within each file be reported in both English and Ukrainian. These requirements, that are designed to provide Ukrainian tax authorities with a highly detailed and accessible view of the MNE group's activities within the country, add a layer of complexity.
Recent communication from the tax authorities indicates that, while they understand the report's complexity, there is no intention to change the XML schema in the near future.
Given the complexities surrounding these requirements, and the potential for significant penalties, companies should pay close attention to these developments and seek expert advice to ensure full compliance.