2024 was an important year for taxpayers in Ukraine. The first campaign for the declaration of controlled foreign companies (CFCs), which covered the reporting for 2022 and 2023, has ended. However, a significant number of foreign company owners failed to comply with the law.
The main violations included:
- Failure to notify the acquisition or loss of control over a CFC;
- Failure to submit a report on the CFC.
The reasons for such violations were often a lack of trust in government agencies or a lack of awareness of the law.
Sanctions for violation of CFC rules
The current legislation provides for severe penalties for failure to comply with CFC requirements:
- The penalty for failure to submit a report is UAH 302,800 (depending on the reporting year);
- The penalty for late submission of the report is UAH 3,028 for each day, but not more than UAH 151,400.
These provisions made the issue of CFC liability extremely relevant for many businesses.
Legislative Relief during Martial Law
Against the backdrop of martial law, the Verkhovna Rada adopted Law of Ukraine No. 3706-IX, which temporarily exempted taxpayers from penalties for violation of CFC rules from January 1, 2022 until six months after the end of martial law. However, the interpretation of this provision caused controversy.
The tax authorities viewed it as a postponement of fines rather than a complete cancellation of fines for violation of CFC rules. This created risks of imposing sanctions after the end of martial law.
Law No. 9319: Resolving a legal conflict
On December 4, 2024, the Verkhovna Rada adopted Law No. 9319, which amended the Tax Code of Ukraine. The new version of paragraph 72 of subsection 10 of Section XX "Transitional Provisions" provides for:
- Exemption from penalties for failure to submit or delay in submitting notifications and CFC reports if the payer fulfills its obligations within six months after the end of martial law;
- Exemption from administrative and criminal liability for related violations.
What does this mean for business?
The adoption of the new Law No. 9319 was an important step to support businesses and abolish fines for violating CFC rules. Taxpayers who have not fulfilled the CFC requirements for various reasons now have the opportunity to:
- Fulfill their obligations without the risk of penalties;
- Avoid administrative and criminal liability for violations committed during martial law.
How can Maira Consult help?
Our team of lawyers always keeps abreast of changes in legislation. We offer:
- Consultations on compliance with the requirements of the CFC legislation;
- Preparation and submission of CFC reporting;
- Protection of your interests in disputes with tax authorities.
For more information or legal assistance, please contact Maira Consult. Together we will find the best solution for your business!
