A controlled foreign company (CFC) is a legal entity registered in a foreign state or territory that is recognized as being under the control of a natural or legal person resident of Ukraine.
A CFC controller is an individual or legal entity that is a resident of Ukraine, owns a share or has significant influence on the activities of a controlled foreign company (CFC). In other words, it is a person who directly or indirectly owns or controls a foreign company.
Every controller resident of Ukraine is obliged to submit a notification on the acquisition/disposal of a share in a CFC and submit annual reports.
DS Solutions can help with all tax issues arising from owning shares in foreign companies, including:
- Analysis of the application of CFC rules in each individual case.
- Preparation and submission of a notice of acquisition/alienation of a share in a CFC.
- Preparation and submission of CFC reports:
- Calculation of the CFC’s adjusted profit;
- Analysis of tax exemption opportunities.
- Advising on all matters related to taxation of CFC’s income in Ukraine.
- Legal support of inspections by regulatory authorities, preparation of responses and development of a controller’s defense strategy.
Who may need legal support in matters of controlled foreign companies?
If you own a share in a foreign legal entity, we can help you determine whether the CFC rules apply to you.
As noted above, the reporting obligation rests with controllers.
According to the Tax Code of Ukraine, a CFC controller is a person who:
- Holds more than a 50% stake in a foreign company;
- Holds more than a 10% stake if several residents of Ukraine together control more than 50% of the company;
- Exercises actual control over a foreign company, even if it does not have a direct ownership stake.
When does the Controller need to submit a CFC notification?
Notification of the acquisition or disposal of a CFC’s share must be submitted in the following cases:
Obtaining a share: For example, through purchase, contribution to the company’s capital, inheritance, or gift.
Alienation of a share: For example, through sale, exchange, gift or liquidation of the company.
Changes in shares: An increase or decrease in a share due to corporate changes in the company’s structure.
What is the deadline for submitting a CFC notification?
The Tax Code obliges the CFC Controller to notify the tax authority of the acquisition or disposal of a share in the CFC within 60 calendar days from the date of such event.
When do I need to submit CFC reports?
Controllers are required to submit the CFC report simultaneously with the submission of the annual property and income declaration (for individuals) or in the corporate income tax declaration (for legal entities). Information on CFCs and adjusted profit subject to taxation in Ukraine is also reported in the annual property and income tax return. Such a declaration is submitted May 1 of the year following the reporting year for individuals or within the time limits specified for filing a corporate income tax return for legal entities.
DSSolutions has many years of experience in supporting CFCs and offers comprehensive services covering all aspects of their activities. Our specialists provide high-quality support in submitting notifications on the acquisition or alienation of a share in a CFC, as well as in preparing and submitting mandatory reports. In addition, we provide services for the preparation of a detailed tax analysis, taking into account the specifics of the legislation regulating CFCs, which allows our clients to effectively manage risks and comply with the requirements of the current legislation.
DSSolushions understands that CFC taxation issues can be complicated, but we strive to make the process as simple as possible for our clients. We are always ready to answer your questions and provide legal support at all stages of cooperation.
