If the salary is not official. Are banks required to disclose tax information on Ukrainians’ accounts?

“Each bank has internal financial monitoring procedures and uses a risk-based approach for each client. Therefore, verifying the source of the client’s funds may differ depending on the banking institution, the client’s risk, and the operations carried out by it.”

Every bank must maintain banking secrecy, including information about inflows into accounts. Disclosure of the latter is possible in cases and to the extent determined by law.

For example, tax authorities, upon request, can obtain information from the bank about the existence of an account in an individual. In other cases, disclosure of information requires a court order. This was also emphasized by the Central Bank of Ukraine in a letter dated 09.11.2021 No. 18-0005/105354 – information about the balance of funds in the accounts, debiting and / or crediting operations in the accounts and the purpose of payments in these accounts bank secrets disclosed by banks at the request of the tax office not included in the list.

Information about the balances in an individual’s accounts and the movement of funds in those accounts, the bank can only transfer tax if there is an appropriate court order.

The need to find out about the status of a person’s bank account may arise when the tax authority establishes the fact that he is engaged in entrepreneurial activities, or if there are grounds to believe that the person has violated tax laws. However, before applying to the court for the disclosure of bank secrets, the tax authority must take appropriate measures to collect and verify information in accordance with tax legislation.

An exception may be justified by reference to the impossibility of taking action against the applicant in accordance with the methods of response prescribed by law. In particular, they may be sent with confirmations that the person whose banking secrets need to be disclosed is not found at the place of registration; inspection etc. confirmed the impossibility of presenting a notice with a copy of the executive order.

Tax risks exist for the employer as the employee’s tax agent if a person receives an unofficial salary for their own account. Tax legislation clearly stipulates the employer’s obligations to accrue and pay ERUs, personal income tax and military tax. Same time, An individual has no obligation to file a tax return and pay taxes if they receive funds from a tax agent.

Every bank has internal procedures for financial monitoring and uses a risk-based approach for each client. Therefore, the verification of the origin of the client’s funds may differ depending on the banking institution, the risk of the client and the transactions carried out by him.

When trading in the amount of 400,000 UAH or more, the bank may request documents confirming the source of funds.

The bank creates a profile of its customer (age, social status, field of activity, income, use of banking services, communication with the bank, etc.). At the same time, the verification of the origin of the client’s funds may differ depending on the bank and the internal criteria of the client’s risk applied by the client.

As a general rule, when trading UAH 400,000 or more the bank may request documents confirming the origin of the funds. Until they are available, the bank can “freeze” these funds. In practice, there are cases when the amount of funds replenished by a person is less than 400 thousand hryvnia, but the bank asks the client to provide supporting documents.. In the event of a “freezing” of funds, the main thing is not to panic. Explanations and documents need to be prepared.

Source: Focus

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