If you are a resident of Ukraine and are planning to open a company abroad or already own a foreign business, this information is mandatory for both familiarization and compliance.
According to the Controlled Foreign Company (CFC) rules adopted and effective in Ukraine since 2021, controlling persons of Controlled Foreign Companies are required to notify the State Tax Service of Ukraine about changes in the status of controlling persons in their CFCs.
In which cases is CFC notification submitted?
Owners of foreign companies must submit a Notification in the following cases:
- Creation of a foreign company or acquisition of a share in it;
- Sale of a share in a foreign company;
- Exercise of actual control over a CFC;
- Cessation of the exercise of actual control over a CFC;
- Liquidation or sale of a foreign company.
It should be noted that these requirements apply to both foreign legal entities and entities without legal entity status, such as trusts, partnerships, funds, etc. Opening a sole proprietorship (FOP) abroad is not considered a CFC, and therefore, the relevant legislation does not apply to them.
The only exception regarding CFC notifications applies to public foreign companies. This category of companies is not required to submit notifications to the State Tax Service of Ukraine.
The legislator has established a single deadline for submitting Notifications in all of the above-mentioned cases - within 60 days from the day of actual changes.
Notification Form and Submission Procedure
The form of the notification and the procedure for its submission were approved by the order of the SFS dated 22.09.2021 No. 512 (came into effect from January 1, 2022), according to which the notification is submitted electronically to the tax authorities at the place of registration. Usually, such documents are sent through the taxpayer's personal account on the SFS website.
The notification form consists of 5 sections and is mandatory to fill out and sign.
It's important to note that a separate notification is sent for each CFC, as well as for each event. That is, if an individual has 4 companies in different countries, in this case, there will be 4 notifications regarding the establishment of different CFCs. If a person creates a company and then exits the list of shareholders, this will correspond to 2 notifications.
Penalties for Failure to Submit CFC Notification
For failure to submit a Controlled Foreign Company (CFC) notification to the supervisory authority, a fine of 300 subsistence minimums per each instance of non-submission is applied. As of January 1, 2023, this amounts to 805,200 UAH. However, exemptions from CFC penalties established by the transitional provisions of Law No. 466 do not apply to this violation. Therefore, the fine may be applied as early as 2022!
Currently, there is a practice of submitting CFC notifications even beyond the 60-day period, as the legislator has not set sanctions for untimely submission. However, there is now a considerable likelihood that the State Tax Service (DPS) will learn about your CFC from other sources, such as open foreign registries or within the framework of the Common Reporting Standard (CRS) for International Financial Exchange. Hence, we recommend not ignoring this requirement and submitting the CFC notification on time.
Given the established practice, the lawyers of our company can assist with the preparation and submission of the CFC notification, ensuring your proper compliance with Ukrainian legislation.
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