Controlled Foreign Companies

Who needs this service:

A Ukrainian resident is recognized as a controlling person, among other cases, if:

- They directly or indirectly own more than 50% of a foreign legal entity;
- They own more than 10% of a foreign entity, provided that several Ukrainian residents, either individuals or legal entities, together hold 50% or more of the foreign entity;
- They exercise actual control over a foreign company independently or together with other related Ukrainian residents. The burden of proving actual control over a CFC is placed on the tax authorities.

 

Purpose of implementing CFC rules:

- Combating Tax Evasion: CFC rules prevent Ukrainian residents from creating affiliated companies abroad to shift profits and avoid taxation in Ukraine.
- Tax Transparency: CFC regulations provide greater transparency for Ukrainian residents regarding their controlled foreign companies, improving tax control, reporting, and income declaration.
- Protecting National Interests: This regulation helps safeguard Ukraine's national interests by ensuring that profits from foreign assets are taxed and preventing the loss of tax revenue.

 

Service process:

- Analyzing the client’s business structure to identify potential connections with Controlled Foreign Companies (CFCs);
- Developing a strategy considering optimal solutions;
- Calculating the CFC’s adjusted profits;
- Preparing and submitting the CFC Report along with the annual standalone financial statements of the CFC, and additional information about the CFC upon request from the State Tax Service;
- Submitting notifications on any changes in ownership interest in the CFC or commencement of actual control over the CFC.