Controlled foreign companies: submission results of notifications

Press service of the State Tax Service of Ukraine, published 19 January 2024 at 11:30 Chapter: News

Since the beginning of 2022, the State Tax Service of Ukraine has received 8366 notifications about 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 7956 are from individuals – residents of Ukraine and 410 from legal entities – residents of Ukraine. Main countries in which individual (legal entity) – resident of Ukraine acquired/alienated shares in the 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 – 25%, Great Britain – 13 %, United States of America – 11%, Republic of Cyprus – 9%, Republic of Estonia – 7%, other countries - 35%.

​In addition, according to Subparagraph 39².6.3 of Paragraph 39².6 Article 39² Section I of the Tax Code of Ukraine (hereinafter – Code), banks/financial institutions and controlling bodies sent 10766 notifications to the State Tax Service of Ukraine about facts that indicate ownership of a share in the foreign legal entity by individual – resident of Ukraine.

​At the same time, it should be reminded that Subparagraph 39².5.5 of Paragraph 39².5 Article 39² Section I Code stipulates 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 the 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) as the 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, formation without the legal entity’s status or termination of actual control over the foreign legal entity, or alienation of share in the foreign legal entity, or termination of actual control over the foreign legal entity within terms stipulated in Subparagraph 39².5.5 of Paragraph 39².5 Article 39² Section I of the Code entails imposition of a fine in the amount of 300 of subsistence minimum for able-bodied individual, established by the law on January 1 of tax (reporting) year for each such fact (Paragraph 120.7 Article 120 Section II of the Code).