Results of submission of the first Reports on controlled foreign companies
State Tax Service received 389 Reports on controlled foreign companies (hereinafter – Report) in the abbreviated form and 285 full Reports since the beginning of 2023.
At the same time, please note that Paragraph 392.5 Article 392 Section I of the Tax Code of Ukraine (hereinafter – Code) stipulates that if Report was submitted in the abbreviated form – it is necessary to submit full Report by the end of calendar year following the reporting (tax) year. If, according to such report, the total taxable income, corporate income taxation object of the controlling person increases, such person has to submit a clarifying annual property and income declaration or corporate income tax declaration by the end of calendar year following the reporting (tax) year. At the same time, financial sanctions and/or fines are not applied.
It must be remembered that Report is submitted for each controlled foreign company separately.
Procedure for filling out Report on controlled foreign companies, the abbreviated form of Report on controlled foreign companies and submitting it to the controlling body was approved by Order of the Ministry of Finance of Ukraine № 254 as of 25.08.2022.
For purposes of tax control over the income taxation of controlled foreign company, reporting (tax) period is a calendar year or another reporting period of the controlled foreign company that ends during the calendar year (Sub-paragraph 392.5.1 Paragraph 392.5 Article 392 of the Code). Herewith, Paragraph 54 Sub-section 10 Section XX "Transitional Provisions" of the Code stipulates that the first reporting (tax) year for report on controlled foreign companies is 2022 (if the reporting year does not correspond to the calendar year – reporting period starting in 2022).
At the same time, Paragraph 54 Sub-section 10 Section XX "Transitional Provisions" of the Code stipulates that controllers of controlled foreign companies have a certain transition period for preparation for reporting, which provides for the opportunity to submit reports for 2022 to the controlling body simultaneously with submission of the annual property and income declaration or corporate income tax declaration for 2023, i.e. in 2024.
Therefore, Report must be submitted simultaneously with submission of annual property and income declaration (for individuals) or corporate income tax declaration (for legal entities) for relevant calendar year:
- for individual – until May 1, 2024 for Reports based on results of 2022-2023;
- for legal entity – until March 1, 2024 for Reports based on results of 2022-2023.
Method of submitting report to the controlling body is the electronic form (for each controlled foreign company separately).
Electronic forms of documents are posted on web portal of the State Tax Service in section "Electronic reporting / To taxpayers about electronic reporting / Information and analytical support / Register of electronic forms of tax documents" (https://tax.gov.ua/elektronna-zvitnist/platnikam-podatkiv-pro/informatsiyno-analitichne-za/reestr-elektronnih-form-po/).
Duly certified copies of financial reporting of the controlled foreign company confirming amount of its profit for the reporting (tax) year must be attached to the Report. If the deadline for preparation of financial reporting in relevant foreign jurisdiction is later than the deadline for submitting annual property and income tax declaration or corporate income tax declaration, such copies of financial reporting of the controlled foreign company is submitted together with the annual property and income tax declaration or corporate income tax declaration for the next reporting (tax) period (Sub-paragraph 392.5.2 Paragraph 392.5 Article 392 of the Code).
Liability for failure to comply with rules of the controlled foreign company (Paragraph 120.7 Article 120 of the Code):
Failure to submit the Report by the controlling person entails imposition of a fine in the amount of 100 amounts of the subsistence minimum for an able-bodied person, established on January 1 of the tax (reporting) year (268.400.00 UAH in 2023).
Late submission of the Report is subject to a fine in the amount of 1 amount of the subsistence minimum for an able-bodied person, established by the law on January 1 of the tax (reporting) year, for each calendar day of non-submission (but not more than 50 amounts of the subsistence minimum for an able-bodied person, established by the law on January 1 of the tax (reporting) period; 134.200.00 UAH in 2023).
At the same time, Sub-paragraph 54 Sub-section 10 Section XX of the Code establishes that:
Financial sanctions and penalties for violating requirements of Article 392 of the Code determining and calculating profit of the controlled foreign company are not applied for results of the reporting (tax) years2022-2023;
according to results of the reporting (tax) years2022-2023, administrative and criminal liability for any violations related to the application of norms of Article 392of the Code are not be applied to the taxpayer or to such taxpayer’s officials.
