On 25 October 2014, the Law of Ukraine No.1701-VII On Amending Certain Legislative Acts Related to Identification of Ultimate Beneficiaries of Legal Entities and Public Officials (the Law) was officially published. The Law comes into effect starting 25 November 2014.

The Law provides for a six-month transitional period during which all legal entities must bring information recorded in the public companies register into compliance with the new rules as described below.

Specifically, the Law provides:

• Companies will have to identify their ultimate beneficiaries, maintain records on such beneficiaries and update such information.
• The ultimate beneficiary is defined as an individual who exercises, directly or indirectly, the decisive influence on the management or business activity of a company, irrespective of possessing a formal right thereto.
• The Law extends the list of the information on the founders of a company which one must disclose during incorporation of a company and which is further published in the State Register of Legal Entities and Individual Entrepreneurs (the Companies Register).
• Information on ultimate beneficiaries should be disclosed to the state registrar at the stage of incorporation of a company and should then be updated in the Companies Register on a regular basis.
• Information on ultimate beneficiaries (full name, state of citizenship, passport and tax identification data) of companies will become accessible to anyone. To this end, the government must adopt respective amendments to legislation governing procedure for obtaining information from the Companies Register.
• Administrative liability (a fine from UAH 5,100 to UAH 8,500) will be introduced for officers or authorized representatives of companies who fail to disclose the information on ultimate beneficiaries to the state registrar.
• It is important to note that the tax authorities may use information on ultimate beneficiaries of taxpayers for the purposes of applying of the concept of beneficial (ultimate) recipient (owner) of income established by the Tax Code of Ukraine and by the effective double tax treaties. Currently there is no statutory guidance or the established practice in this regard.

EY Tax Alert