To the attention of controllers of controlled foreign companies!
State Tax Service of Ukraine reminds that from January 1, 2022, controllers of controlled foreign companies are entrusted with obligations of submitting Notifications on controlled foreign companies, Reports on controlled foreign companies simultaneously with submission of the corporate income tax declaration or property and income tax declaration and pay taxes accordingly.
According to Article 392 Section I of the Tax Code of Ukraine (hereinafter – Code), if resident of Ukraine (individual/legal entity) has registered legal entity in a foreign state/territory, and in some cases, entity without the legal entity’s status (for example: trusts, foundations), such legal entity (formation without the legal entity’s status) is a controlled foreign company.
For failure to comply with rules on controlled foreign companies, the controlling entity is subject to financial liability in the form of a fine, amount of which is determined by Paragraph 120.7 Article 120 Section II of the Code.
By the Law of Ukraine № 3706-IX as of 09.05.2024 "On amendments to the Tax Code of Ukraine and other Laws of Ukraine regarding of export peculiarities of certain product types during the martial law" (hereinafter – Law № 3706-IX) new Paragraph 72 was added to Sub-section 10 Section XX "Transitional Provisions" of the Code, according to which, temporarily from January 1, 2022 and during the martial law in Ukraine, introduced by Decree of the President of Ukraine "On introduction of the martial law in Ukraine" № 64/2022 as of 24.02.2022, approved by the Law of Ukraine "On approval of Decree of the President of Ukraine "On introduction of the martial law in Ukraine" № 2102-IX as of 24.02.2022, and six months after the month in which martial law will be suspended or canceled, in particular, taxpayers are not be subject to fines for violations provided for in Clauses 1 – 8 of Paragraph 120.7 Article 120 of the Code.
However, the provisions of Paragraph 72 Sub-section 10 Section XX "Transitional Provisions" of the Code only postpone application of liability for violations provided for in Clauses 1 – 8 of Paragraph 120.7 Article 120 of the Code, and provide for the possibility of applying fines for such violations after expiration of six months after the month in which the martial law introduced by Decree of the President of Ukraine "On introduction of the martial law in Ukraine" № 64/2022 as of 24.02.2022, approved by the Law of Ukraine "On approval of Decree of the President of Ukraine "On introduction of the martial law in Ukraine" № 2102-IX as of 24.02.2022 will be terminated or cancelled.
In view of the above specified, the State Tax Service of Ukraine emphasizes the need for controlling entities to comply with rules of controlled foreign companies, which are regulated by Article 392 Section I of the Code.
Work is currently ongoing to establish controllers of controlled foreign companies that have not fulfilled obligation to report on controlled foreign companies.
