CFC reporting in Ukraine is an annual obligation for individuals and legal entities that control a foreign company. For now it’s a new practice for both company owners and State Tax Service of Ukraine. Consequently it is possible that the legislation in this regard will be further amended and finalized.
Such reposting is important for ensuring the transparency of taxation in Ukraine. It allows the controlling authorities to ensure that the profits of CFCs controlled by ukranian citizens and companies are taxed in the country of registration or in Ukraine according to the law. Specifically for these purposes such a burdensome requirement was introduced.
Who should submit a CFC report?
According to Ukrainian law, CFC reporting is submitted by controlling persons who are residents of Ukraine and have a stake in a foreign company that meets the control criterion (more than 50% ownership by Ukrainian residents).
In practice, this means that CFC reporting is submitted for virtually all controlled foreign companies, if any. That is, a controlling person of a Ukrainian resident submits the CFC Report for:
- active/operating CFC;
- inactive/dormant CFC;
- liquidated/sold CFC;
- CFC that is not subject to taxation;
- CFC without/with profit.
The first CFC reporting must be submitted for the 2022 financial year (it was possible to submit it in 2023 or 2024 at the request of the controller). Starting from 2023, the reports should be submitted annually for the previous financial period equal to one year. In other words, the reporting period for submitting reports is one calendar year, or any other period ending in a calendar year (if the reporting period differs from the calendar year).
The general deadlines for submitting the CFC Report depend on who controls the foreign company:
- If a CFC is controlled by an individual, the CFC’s report should be submitted with the annual declaration of property status and income, as well as duly certified copies of the CFC’s financial statements – by May 1 of each year following the reporting year.
- If a CFC is controlled by a legal entity, the CFC’s report should be submitted with the annual corporate income tax return, as well as as duly certified copies of the CFC’s financial statements - by March 1 of each year following the reporting year.
HOW TO SUBMIT THE CFC REPORT: FORMS AND ATTACHMENTS?
The CFC report is submitted to the State Tax Service exclusively in electronic form through the Taxpayer's Electronic Account.
The legislator has provided for two forms of submission of the CFC report, since different foreign jurisdictions have different deadlines for preparing financial statements:
- Full CFC report – for companies with prepared for the general filing deadline financial statements;
- Short CFC report – for companies with unprepared for the general filing deadline financial statements.
Thus, if the financial statements for your foreign company have already been prepared and submitted by March 1/May 1, you are obliged to submit the Full CFC Report for the previous year by this deadline. If the financial statements are not yet ready by the specified deadline, then a Short CFC Report is submitted by this deadline, and the Full CFC Report is submitted by the end of the calendar year (by December 31).
The abbreviated report contains only general information about the company, the reporting period and the data of the controlling person.
The full report, in turn, is already formed with additional information about the CFC, the size of the controlling person's share, the share ownership structure, information on income, calculation of the CFC's adjusted profit, information on the grounds for exemption from taxation of the CFC's profit, the amount of dividends and is formed with Applications:
- Duly certified copies of the CFC’s financial statement;
- Application for waiver of tax exemption on profits of a controlled foreign company (to be submitted in any form if the controlling person voluntarily waives tax exemption on profits of a CFC). This application is submitted if necessary;
- Application K (adjustments), Annex TC (independent adjustment of the price of a controlled transaction) and Annex CP (securities). These annexes are submitted if necessary.
The CFC report is submitted together with the Declaration on property and income or income tax (depending on who is the controller).
RESPONSIBILITY FOR FAILURE TO SUBMIT THE CFC REPORT
Failure to comply with the requirements of the legislation on controlled foreign companies may result in fines. The amounts of fines for CFC violations are quite significant and increase every year, as they are determined based on the minimum subsistence level (the amounts are based on the subsistence level of UAH 3,028 for the period of 2024):
- Failure to submit a CFC report - 100 subsistence minimums (UAH 302,800).
- Late submission of the CFC report - 1 subsistence minimum for each day of delay, but not more than 50 subsistence minimums (up to UAH 151,400).
- Failure to submit a CFC report within 30 days after the deadline for payment of fines - 5 subsistence minimums for each day of delay, but not more than 300 subsistence minimums (up to UAH 908,400).
- Failure to report information on CFCs - 3% of the amount of unreported CFC transactions or 25% of the amount not reflected in the adjusted profit of the CFC, but not more than 1000 subsistence minimums (up to UAH 3,028,000).
The penalty for failure to submit the CFC report is imposed on the individual controller, who is liable for the penalties with the property.
In the case if you need assistance in preparing and submitting the CFC report, our specialists are ready to provide all necessary services.
The cost of preparing the CFC Report will be formed individually and depends on the specifics of your foreign company and its activities. Leave your request and we will get back to you right away!