Controlled foreign companies reporting and liability for reporting violations

Press service of the State Tax Service of Ukraine, published 06 July 2023 at 10:29 Chapter: News

State Tax Service reminds that last year in Ukraine, rules of control over controlled foreign companies were introduced (Laws of Ukraine No. 466-IX as of 16.01.2020 and No. 1117-IX as of 17.12.2020). Starting from January 1, 2022, for opening business abroad, the legal entity or individual resident of Ukraine must prepare and submit:

- information on the acquisition/termination of participation in the controlled foreign companies, in particular, Notification on the acquisition (beginning of actual control) or alienation (termination of actual control) by resident of a share in the foreign legal entity or property rights to a share in assets, income or profit of entity without the legal entity’s status (hereinafter - Notification), form of which was approved by Order of the Ministry of Finance of Ukraine No. 512 as of 22.09.2021;

- annual report on the controlled foreign companies (at the same time as the annual property status and income declaration). Paragraph 54 Sub-section 10 Section XX "Transitional Provisions" of the Tax Code of Ukraine (hereinafter – TCU) establishes application specifics of provisions on the income taxation of controlled foreign companies during the transitional period, in particular, controlling individuals have a right to submit Report for 2022 to the controlling body simultaneously with submission of the annual Declaration for 2023. Herewith, penalties and/or fines are not applied.

Provisions of Article 39² of the TCU stipulate that controlled foreign companies any legal entity registered in a foreign country or territory, which is recognized as being under control of individual or legal entity – resident of Ukraine, according to rules defined by the TCU, is recognized as a controlled foreign company.

Please note that in order to comply with legislative requirements regarding rules of the controlled foreign companies, individuals and legal entities – residents of Ukraine should analyze in detail conditions for owning a share in the foreign company, determine presence or absence of status of the controlling individual of such company and carry out reporting measures provided for in Article 39² of the TCU.

Fulfill your obligations on time so as not to pay significant fines for failure to comply with requirements of Article 39² of the TCU.

Important! Penalties and/or fines are not applied for late submission of the Notification.