The State Tax Service of Ukraine has reported increased taxpayer activity within the Controlled Foreign...Читати далі
A controlled foreign company (CFC) is a legal entity registered in a foreign country or territory recognized as being controlled by a natural or legal person – a resident of Ukraine (controlling person).
A foreign company is recognized as a CFC if the controlling person:
You can check whether your company is recognized as a controlled entity, draw up a CFC Notification and Report, and find the grounds for exemption from CFC taxation with the help of Kreston Ukraine specialists.
If your company is a CFC by the terms of this law, then you have certain liabilities to the tax authorities of Ukraine:
The Notification is submitted within 60 days after the occurrence, change or termination of direct (indirect) control.
Submission of the report to the supervisory authority occurs simultaneously with the request of the annual income tax declaration for controllers-legal entities and the order of property status and income for individuals for the corresponding calendar year:
for a legal entity controller – until March 1, following the reporting year.
for an individual controller – until May 1 of the year following the reporting year.
Even if the foreign company did not need to prepare financial statements before that, it would be necessary to prepare them because the duties of the controlling person include the calculation of the adjusted profit of the CFC based on its financial statements (that is, adjusted for certain expenses or income that are not related to its core activity). The tax office may also require the provision of an audit report on the financial statements of the CFC under IFRS.
! If, as at March 1 (or May 1) of the year following the reporting year, the controlled foreign company has not yet prepared financial statements, it is possible to submit a simplified report without financial indicators and by December 31 of the following year to submit a full report on the CFC with information about financial indicators.
In the absence of grounds for exemption from taxation of the CFC, the controlling person must pay tax (18% income tax for legal entities, 18% personal income tax + 1.5% military levy for individuals) on a part of the adjusted profit, which is proportional to the share that this the person owned at the end of the reporting period.
Profit of the CFC may be exempted from taxation if:
- conducts active work (provides services, manufactures goods, bears relevant risks, and the share of its passive income - from royalties, dividends, interest on deposits – does not exceed 50% of total income.
- or pays income tax in the country of registration that is not less than the basic rate of corporate income tax in Ukraine (18%) or less than such rate by no more than 5% (that is, not less than 13%).
However, the exemption from taxation does not exempt from the need to submit a Notification and a Report on CFCs.
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Permanent communication with representatives of UKRPOSHTA allowed the company's consultants to find the optimal solution for the implementation of the agreed project and check the presence of transfer pricing risks. Considering the positive experience of cooperation, we recommend Kreston Ukraine as a reliable and competent partner in the field of transfer pricing.
UKRPOSHTA
The results of cooperation allow us to conclude that Kreston Ukraine experts are true professionals in their field. We are satisfied with the result and are ready to expand our partnership in the future. We recommend Kreston Ukraine as a reliable consultant and experienced transfer pricing expert.
SCHROEDER UKRAINE
Pharmastor LLC has been cooperating with Kreston Ukraine since 2017 and has no doubts about the high qualifications and competence of the specialists in this company. Through many years of cooperation, we have become convinced of the integrity, objectivity and professionalism of Kreston Ukraine employees. In view of many years of positive experience of cooperation, Pharmastor confidently recommends Kreston Ukraine as a reliable, competent and highly qualified partner in the field of transfer pricing.
PHARMASTOR
The extremely attentive attitude of Kreston Ukraine specialists to the needs of the client, the ability to quickly navigate and find solutions to problems should be noted, as well as excellent knowledge of tax legislation. The internal and external communication of the team is also commendable. We are completely satisfied with the quality and efficiency of company’s work and recommend Kreston Ukraine to resolve tax issues and provide transfer pricing services.
FC "DYNAMO KYIV"
The quality of services provided to us by Kreston Ukraine team meets our high expectations from working with a company that has a reputable international network. The experts helped us to find a convincing justification for our arm's-length operations and carefully prepared all the necessary documentation stipulated by the terms of the contract. The team of experts is distinguished by deep competence and understanding of the specific features of the banking sector. We are satisfied with our cooperation with Kreston Ukraine and confidently recommend the company to everyone who needs help with transfer pricing issues.
BANK FOR INVESTMENTS AND SAVINGS
Kreston Ukraine specialists provided our company with transfer pricing services. In the course of the work, the company's specialists prepared recommendations that made it possible to significantly improve the quality of our transfer pricing documentation. Since cooperation with Kreston Ukraine has fully justified itself, Budpostach confidently recommends the experts of this company to resolve issues and consultations on transfer pricing.
BUDPOSTACH
During the period of cooperation, the employees of the company have established themselves as specialists who fulfill their obligations at a high quality level and strictly within the terms established by the contract. We note the efficient work and promptness of tasks, attentive attitude to the needs of the client and deep knowledge of the industry.
STAR MEDIA
We are satisfied with our cooperation with Kreston Ukraine and recommend the company as a reliable business partner. The team carried out high-quality work and data analysis, focusing on the main transfer pricing rule - the “arm's length” principle. All information was provided within the terms established by the contract.
ROSHEN
In the course of work, we were convinced of the high qualifications of Kreston Ukraine employees. The specialists quickly responded to the questions we had during the project implementation. The company has extensive experience not only in the field of transfer pricing, but also in the taxation of agricultural enterprises in Ukraine.
MAS SIDS UKRAINE
The services provided by Kreston Ukraine allowed us to fulfill our obligations under Art. 39 and Art. 140.5 of the Tax Code of Ukraine. Our experience of cooperation was positive; therefore, we confidently recommend Kreston Ukraine as a competent expert in the field of transfer pricing.
UNIVERSAL FISH COMPANY
Specialists have demonstrated the ability to carefully and timely perform all necessary procedures and adhere to the conditions specified in the contract. Attention and flawless communication between the team and the client deserve recognition. The company fulfilled all contractual obligations in full.
MONOMAKH
A CFC is a foreign legal entity controlled by an individual or legal entity that is a tax resident of Ukraine. Control may arise through ownership interest in the company or actual influence over its activities.
Yes. Even if the foreign company has not conducted active business activities or generated profit, the controlling person is still required to submit a CFC notification and report in accordance with the Tax Code of Ukraine.
Only temporarily postponed. If the CFC financial statements are not yet available on the filing date, the controlling person may submit a simplified report without financial indicators and provide the full report by December 31 of the year following the reporting year.
During martial law, a special transitional rule applies: penalties for most violations предусмотрених by paragraph 120.7 of the Tax Code of Ukraine are temporarily not imposed, provided that the controlling person properly fulfills their obligations after martial law ends. However, after the end of martial law, or in case of non-compliance, significant penalties may apply, including for failure to submit a CFC notification, failure or late submission of a CFC report, as well as errors or incomplete disclosure in the report.
Automatic international exchange of information enables tax authorities to obtain data on foreign assets, accounts, and ownership structures. Therefore, companies and CFC controllers should proactively assess tax risks, ownership structures, and the accuracy of their reporting.
