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What Else We Do Not Know about Declaring by Government Officials


Galyna Melnyk, lawyer at Ilyashev & Partners Law Firm
Source: Ekonomichna Pravda

If the wife presents her house to the declarant’s mother-in-law, who lives separately and is not considered a member of his family, we will not see such house in the list of real estate in the tax return for this period.

October 30 is the last day for filing declarations by government officials.

The public is carefully studying the declarations, which are already available in the system. Now it is certainly the topic of the day.

Let us talk about the difficulties that the new law will still have to face.

Briefly, what is written in the Law of Ukraine “On Prevention of Corruption”.

The law sets forth that officials are required to declare all costs and transactions, based on which they have the right of ownership, possession, use of assets arisen or terminated, or which led to financial commitments.

What transactions and costs must be recorded in the declaration?

They are real estate, construction in progress, valuable movable property, including transport vehicles, securities, corporate rights, intangible assets (trademarks, patents), money (cash, on bank accounts), and any other income.

The threshold for declaring in this section is 50 minimum wages or 68.9 thousand hryvnias.

If the official acquires (buys, receives as a gift or in use), or alienates (sells, presents, changes) any property he must declare and, thus, incurs expenses in excess of 68.9 thousand hryvnias, such transaction/expense must be recorded in the anti-corruption declaration in the section “Expenses and Losses”.

It would seem that everything is simple, but it is not so.

The above rules raise many questions regarding what specific indices should be recorded in the anti-corruption declaration.

The answers to these questions are only partially provided in the clarification of the National Agency for Prevention of Corruption (the NAPC, EP) on the procedure for filling in the declaration.

The first question is what is meant by expense (costs)?

Whether alienation of property is considered an expense in the form of cost of such property, or only cash expenses should be considered as expenses? The question is especially topical if the declarant presents his property to the formally unrelated parties.

Should we take into account the related expenses that are not directly related to its subject matter, e.g. for legal support and notarization of the transaction?

Neither the Law nor the NAPC give definitive answers to these questions. The NAPC only clarifies that if the transaction does not incur expense, such a transaction should be recorded in the section “Other transactions” rather than in the section “Expenses” .

Recording of monetary expenses seems quite logical in the section “Expenses”, and non-monetary, e.g., the property presented by the declarant – in the section “Other transactions”.

The second question is whether the threshold of 50 “minimum wages” referred to in relation to declaration of expenses is also applicable to transactions? After all, if just follow the text of the law, the limit of 68.9 thousand hryvnias refers specifically to the amount of expenses (cost), while in respect of declaration of transactions the law does not set any threshold.

However, the NAPC clarifies that the threshold of 50 “minimum wages” also applies to the transactions. It means that in the column “Other transactions” of the section “Income and transactions” should be recorded only those transactions, the subject matter of which exceeds 68.9 thousand hryvnias. For example, receipt of expensive watches or jewelry as a gift.

The important point for the correct filling in of the section “Income and transactions” is that in this section the items should be recorded separately, i.e. the expenses and the subject matters of transactions are not cumulative, the information on each particular expense and transaction is recorded.

It is noteworthy that this section of the declaration should contain only the indices relating directly to the declarant, and the expenses and transactions made by members of his family are not recorded.

It means that if the wife of the declarant presents her house to the declarant’s mother-in-law, who lives separately and is not considered a member of his family, we will not see such house in the list of real estate in the tax return for this period.

The declaration will not also have any information why it happened.

With regard to liability for concealment of information in respect of expenses and transactions, it is envisaged only for deliberate actions, in particular, for deliberately false information.

It means the need to prove intent of the declarant that he was aware of inaccuracy of the declared information.

The NAPC clarifies that if false information was provided to the declarant by a member of his family, the responsibility of the declarant can only occur if he was aware of inaccuracy of such information, but I still specified it in the declaration. The intent of the family member does not matter in this case.

Criminal and administrative liability is set forth for lies in the declaration. Criminal liability under Art. 366-1 of the Criminal Code of Ukraine occurs only in case if false information in the declaration differs for the reliable information in excess of 250 minimum wages – by 344.5 thousand hryvnias in 2016.

The Code envisages the following sanctions: fine of 42,500 – 51,000 hryvnias, community service, deprivation of liberty for up to 2 years, and in addition – deprivation of the right to hold office up to 3 years.

If the information in respect of expenses and transactions differs from the actual information for the amount between 100 and 250 minimum wages (137,800 – 344,500 hryvnias), the declarant is subjected to administrative liability under Art. 172-6 of the Code of Administrative Offences of Ukraine in the form of fine of 17,000 – 42,500 hryvnias.

If the differences are less than 137.8 thousand hryvnias, responsibility does not occur at all.

In this regard, it is important to note that the form of the declaration envisages the possibility to double the indices, e.g. receipt of property as a gift must be recorded in the sections “Income”, “Real estate” and “Expenses and transactions” as another transaction that did not incur expense.

If the government official records such gift received in other sections of the declaration, but omits recording in the section “Expenses and transactions”, liability is not likely to occur, because in this case we can speak about a mistake in the methodology of filling in the declaration as in general the essence of the transaction was recorded in the declaration, i.e. it was not intentional concealment.

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