Controlled foreign companies: reporting results!

Since the beginning of 2022, the State Tax Service has received 6721 notifications on the acquisition of ownership, registration and sale/liquidation of the foreign controlled company or formation without the legal entity’s status (funds, trusts) (hereinafter – Notifications), of which 6430 from individuals – residents of Ukraine and 291 from legal entities – residents of Ukraine. Main countries where individual (legal entity) – resident of Ukraine acquired/alienated shares in a foreign legal entity, property rights to a share in assets, income or profit of entity without the legal entity’s status are the Republic of Poland – 33%, Great Britain – 15%, United States of America – 13%, Republic of Cyprus – 11%, Republic of Estonia – 7%, other countries – 21%.

In addition, for implementation of Sub-paragraph 39².6.3 of Paragraph 39².6 Article 39² of the Tax Code of Ukraine (hereinafter – Code) banks/financial institutions and other controlling bodies sent 9881 notifications to the State Tax Service about facts indicating ownership of a share in the foreign legal entity by individual (legal entity) – resident of Ukraine.

At the same time, please note that Sub-paragraph 39².5.5 of Paragraph 39².5 Article 39² of the Code defines the need to submit notification to the controlling body about:

- each direct or indirect acquisition of a share in the foreign legal entity or beginning of physical control over the foreign legal entity, which leads to recognition of such individual (legal entity) as a controlling entity according to requirements of Article 39² of the Code;

- establishment, creation or acquisition of property rights to a share in assets, income or profit of entity without the legal entity’s status;

- each alienation of a share in the foreign legal entity or termination of actual control over the foreign legal entity, which leads to the loss of recognition of such individual (legal entity) by a controlling entity according to requirements of Article 39² of the Code;

- liquidation or alienation of property rights to a share in assets, income or profit of entity without the legal entity’s status.

It is also worth remembering that if the controlling person does not notify the controlling body about acquisition of a share in the foreign legal entity, entity without the legal entity’s status, or termination of actual control over the foreign legal entity, or alienation of a share in the foreign legal entity, or termination of actual control over the foreign legal entity within terms stipulated in Sub-paragraph 39².5.5 of Paragraph 39².5 Article 39² of the Code, there is imposition of a fine in amount of 300 amounts of the subsistence minimum for an able-bodied person, established by law on January 1 of the tax (reporting) year for each such fact (Paragraph 120.7 Article 120 of the Code).

Additionally, we inform that the Draft Law № 8137 "On amendments to the Tax Code of Ukraine on improving taxation of controlled foreign companies" provides for changes to Paragraph 120.7 Article 120 of the Code in terms of the addition of a fine for late notification by the controlling person of the controlling body of acquisition of a share in the foreign legal entity, formation without the legal entity’s status, or about beginning of actual control over the foreign legal entity, or about alienation of a share in the foreign legal entity, or about termination of actual control over the foreign legal entity within terms stipulated by Sub-paragraph 39².5.5 of Paragraph 39².5 Article 39² Section I of the Code.