Article 392 of the Tax Code of Ukraine (hereinafter – Code) stipulates that there are rules for income taxation of controlled foreign companies owned by Ukrainian residents (both individuals and legal entities) in other countries (or actually controlled by them) and for which Ukrainian residents are obliged to pay tax in Ukraine from the retained income of such companies.
Specified Article also defines controlled foreign company; establishes conditions under which the taxpayer is determined by the controller of foreign company or foreign entity without the legal entity’s status; procedure for calculating adjusted income of controlled foreign companies and conditions for their exemption from taxation.
Paragraph 54 Sub-section 10 Section XX "Transitional Provisions" of the Code determines specifics of application of provisions on the income taxation of controlled foreign companies during transitional period, in particular, 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). Controlling persons have a right to submit report on controlled foreign companies for 2022 to the controlling body simultaneously with submission of the annual property and income declaration for 2023 with inclusion of the adjusted income of controlled foreign company subject to taxation in Ukraine, specified in such report to the indicators of relevant declarations for 2023. Herewith, financial sanctions and/or fines are not applied.
Sub-paragraph 392.5.2 Paragraph 392 Article 392 of the Code stipulates that controlling persons – individuals are required to submit report on controlled foreign companies to the controlling body simultaneously with submission of the annual property and income declaration for relevant calendar year by the electronic communication means in electronic form in compliance with requirements of the Law on electronic document flow and qualified electronic signature.
Duly certified copies of financial report of controlled foreign company confirming amount of income of the controlled foreign company for the reporting (tax) year must be attached to report on controlled foreign companies. If a deadline for preparing financial report in relevant foreign jurisdiction is later than the deadline for submitting the annual property and income declaration, such copies of financial report of controlled foreign company are submitted together with the annual property and income declaration for the next reporting (tax) period.
Report on controlled foreign companies was approved by Order of the Ministry of Finance of Ukraine № 254 as of 25.08.2022 "On approval of Report form on controlled foreign companies, abbreviated Report form on controlled foreign companies, procedure for filling in Report on controlled foreign companies, abbreviated Report form on controlled foreign companies and submission to the controlling body and Changes to the corporate income tax declaration form", which was registered in the Ministry of Justice of Ukraine on 11.10.2022 under № 1219/38555.
Order № 143 of the Ministry of Finance of Ukraine as of 17.05.2022 "On amendments to the Property and income tax declaration form and Instructions for filling in the Property and income tax declaration", which was registered in the Ministry of Justice of Ukraine on 03.06.2022 under № 593 /3792, stipulates that new property and income tax declaration form (hereinafter – declaration) is being introduced starting from 01.01.2023, which provides for filling in separate application of controlled foreign companies for persons-controllers of controlled foreign companies.
At the same time, the specified annex is filled in separately for each controlled foreign company and the total amount of income of the controlled foreign companies is reflected in section 10.14 of declaration.