Automatic data exchange between the State Tax Service and the State Border Guard Service

What exactly has been launched and how does it work?

Before the new mechanism was introduced, interaction between the State Tax Service and the State Border Guard Service took place manually: the tax authorities sent a written request, border guards processed each request manually and prepared a paper or electronic response. The process could take days or even weeks.

The process is now different. An authorized State Tax Service employee submits an electronic request concerning a specific individual or vehicle directly through the system. The response is generated automatically within seconds, without any manual processing on the State Border Guard Service side.

The agencies communicate through the National Confidential Communication System. Each request is recorded in electronic audit logs, including who made the request, when it was made, and whose data was requested. Anonymous or unauthorized access to the data is technically prevented.

ℹ️ An important detail: the request is targeted — it concerns one specific individual or one specific vehicle. The mechanism does not provide for mass or preventive downloading of the database. Each request must have a clear legal basis.

Why does the State Tax Service need this data: two stated purposes

Purpose 1. Determining tax residency

This is the most practically significant purpose for a broad range of people — not only large businesses, but also individuals who spend a significant part of the year outside Ukraine.

Under the general rule of the Tax Code, an individual is considered a tax resident of Ukraine if they have spent more than 183 days in the country during a calendar year. Tax residency determines which income is subject to taxation in Ukraine, which tax rates apply, and whether there are obligations to declare worldwide income.

Previously, verifying the actual number of days an individual spent in Ukraine without relying on their own records or supporting documents was practically difficult. Now, the State Tax Service has automated access to border-crossing data.

⚠️ What does this mean in practice? If you spent most of 2025 or 2026 abroad but did not file a tax return, or declared only your Ukrainian-source income, the State Tax Service now has the technical ability to verify exactly how many days you actually spent in Ukraine. For those who structured their tax affairs around “informal” non-resident status, this is a significant change.

Purpose 2. Identifying fictitious transactions

The second stated purpose is purely corporate. It concerns a scheme that occurs in practice: a company director signs business documents or reports on a date when they were actually outside Ukraine. In other words, they could not physically have signed the document, which may indicate that it was signed in advance, signed by another person, or forged.

Access to border-crossing data allows the State Tax Service to verify whether the director was actually in Ukraine on the date key documents were signed. For businesses conducting genuine operations, this does not create a problem. For schemes involving a “paper” director, however, it creates a significant additional risk.

What has not changed: the limits of the new mechanism

According to the State Tax Service’s official explanations, the introduction of automated data exchange does not mean:

• new tax audits for individuals — the mechanism concerns only cooperation between government agencies;
• changes to the rules for crossing the state border — the procedure for passing through border checkpoints remains unchanged;
• new grounds for being stopped at the border — decisions on admission and crossing are made by the State Border Guard Service based on its own criteria, not by the State Tax Service;
• access for the State Tax Service to information about the destination or purpose of a person’s trip abroad — only the fact and date of the border crossing are available.

Механізм є інструментом аналітичної роботи всередині ДПС, а не контролю на кордоні.

Legal debate: is there a legal basis for the data exchange?

The initiative has already faced public criticism. Member of Parliament Maksym Buzhanskyi from the Servant of the People parliamentary faction publicly called the transfer of data “absolutely illegal” and announced plans to submit a parliamentary inquiry to the State Border Guard Service requesting a reference to the legal act authorizing such data exchange. The head of the State Border Guard Service has also reportedly been invited to appear before the relevant parliamentary committee.

The question is well-founded. The transfer of personal data between Ukrainian government authorities is governed by the Law of Ukraine “On Personal Data Protection” and a number of sector-specific regulations. Lawful data exchange generally requires either a direct statutory provision or an interagency agreement clearly defining the purpose, scope, and procedure for transferring the data.

The agencies themselves have not yet publicly identified a specific regulatory document that serves as the legal basis for automated, rather than request-based, real-time data exchange. This gap in public communication is at the center of the legal debate.

ℹ️ Barbashyn Law Firm’s position: the purpose itself — combating the shadow economy and verifying tax residency — is legitimate and provided for by law. The question is different: is there a sufficient legal basis specifically for automated data exchange without a separate request in each individual case? This is a question that should ultimately be answered either by the legislature or by the courts. Until the legal framework is publicly clarified, the issue remains open.

What this means for businesses and taxpayers: the practical impact

For individuals with income from abroad

If you are a tax resident of Ukraine but spend a significant amount of time abroad, the mechanism for verifying tax residency is now substantially easier for the State Tax Service. This does not mean automatic tax assessments, but it does mean that the “grey area” between formal and actual tax residency is becoming narrower.

If you have deliberately established non-resident status based on your actual presence outside Ukraine, it is worth making sure that your position is supported by documentation: a tax residency certificate from another country, the relevant double tax treaty, and properly completed tax returns.

For companies with non-resident directors or frequent business travel

The practice of signing documents “retroactively” or dating documents on days when the signatory was actually abroad can now be verified much more easily. For companies with transparent and genuine operations, this is not a problem. For structures where operational documentation and the actual presence of the company’s management have long been out of sync, however, this is a risk that has now become more tangible.

For CFC owners and international structures

Combining border-crossing data with CRS mechanisms (the automatic exchange of financial information between countries) gives the State Tax Service an increasingly comprehensive picture: where an individual is physically present, where they hold accounts, and where their companies are registered. For those who have not yet regularized their CFC reporting or properly documented their relationships with foreign structures, this is an additional reason to address these matters now.

Conclusion

Automated data exchange between the State Tax Service and the State Border Guard Service does not introduce new powers to stop citizens at the border or create new types of tax audits. It is a technical improvement to a tool the State Tax Service was already using — but now faster and without manual processing by the State Border Guard Service.

For businesses and taxpayers conducting transparent activities, this mechanism does not fundamentally change the rules. For those who have built their structures around the “invisibility” of their actual tax residency or relied on paper-based documentation without the signatory’s actual presence, it is a serious signal to put their tax affairs in order before the State Tax Service does it itself.

The legal debate over the grounds for automated data exchange remains open and deserves further attention from both the legislature and the courts.