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On July 21, 2021, the Law of Ukraine "On amendments to the Tax Code and other laws of Ukraine regarding stimulation of income transparency and improvement of tax culture of citizens by way of one-time special declaration by individuals of their assets and payment of one-time tax to the budget" (“the Law”) entered into force. The Law provides for an individual amnesty for acquisition assets conducted in violation of tax and currency laws of Ukraine, provided that such individuals submit a one-time voluntary declaration and pay a nominal tax. The Law is inspired by the necessity to increase the transparency of the Ukrainian economy, including the implementation of the recent “anti-BEPS law” adopted last year, and is aimed to motivate Ukrainians to disclose their assets.

Considering that such acquisition of assets could have constituted a concentration under Ukrainian competition laws and could have required a merger control approval from the Antimonopoly Committee of Ukraine, the Law also provides for a merger control amnesty for an acquisition of shares and assets conducted in violation of Ukrainian competition laws to stimulate the use of the one-time special tax declaration to clear illegally acquired assets.

The merger control amnesty covers acquisitions of assets and shares/control otherwise in business entities (in or outside Ukraine) conducted before December 31, 2020, in violation of Ukrainian tax and currency laws and in violation of merger control rules in Ukraine. The amnesty can be applied to an individual who is or was a resident of Ukraine at the time of such acquisition. Legal entities can also benefit from it through their ultimate beneficiaries (i.e. individuals who ultimately exercise directly or indirectly control over the legal entity). The amnesty will not however apply to individuals who are subject to sanctions under the laws of Ukraine and/or has been holding a position of a public officer.

1. To receive a merger control amnesty, an individual shall:File a one-time special tax declaration disclosing the assets/shares/control otherwise acquired in violation of applicable laws and pay one-time fixed tax within the period between September 1, 2021, and September 1, 2022. Under the general rule, the tax shall make 5% of the value of the declared assets/shares/other corporate rights in Ukraine or 9% for assets/shares/corporate rights abroad. 

2. File a respective merger control application to the Antimonopoly Committee of Ukraine within the period between October 1, 2021, and October 1, 2022.

If the AMCU decides that the transaction led to/resulted in a significant restriction of competition or monopolisation of the relevant market, it will apply the general fine rules – up to 5% of the global turnover of the group of companies involved for the year preceding that in which the fine is imposed. However, if the notified transaction did not lead to/result in a significant restriction of competition or monopolisation of the relevant market, the applicant will have to pay only a nominal fine of UAH 20,400 (appr. USD 800).

Thus, the tax and merger control amnesty provides for a good chance for Ukrainian businesses and their beneficiaries to carry out a proper analysis of any transactions completed not in compliance with Ukrainian laws and to clear such transactions with the AMCU over the year with little exposure to both tax and antitrust penalties. 

Antonina Yaholnyk, Managing Partner

Anastasiia Zeleniuk, Associate

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