Every day, we receive questions from our clients regarding CFC reporting. Some of them have learned about CFC recently, some are sure that they do not need to submit CFC reports.
In this regard, we would like to share information on this issue, draw the attention of foreign company owners to the existing legal requirements regarding CFC and help them avoid possible fines in the future.
We remind you that starting from January 01, 2024, all tax residents of Ukraine (individuals and legal entities) who have influence and control over foreign companies (own foreign companies) should pay attention to this issue and submit relevant reports on all controlled foreign companies (CFCs) owned by them to the tax authorities of Ukraine.
What is a CFC?
A controlled foreign company (hereinafter referred to as CFC) is any legal entity registered in a foreign state or territory that is recognized as being under the control of a Ukrainian individual or a Ukrainian legal entity in accordance with the rules set forth in the Tax Code.
In simple words, if a resident of Ukraine owns a share in a foreign company, he/she is obliged to ensure the preparation of financial statements of such company and submit the relevant reports to the State Tax Service of Ukraine.
Is it obligatory to declare a CFC? What happens if I do not submit reports to the CFC?
Yes, the obligation to declare a CFC and submit the relevant reports arises for all residents of Ukraine, although there are exceptions, depending on the size of the share held by the person in the foreign company. The law provides for huge fines for failure to file reports by CFCs.
For example, the main fines for failure to submit CFC reporting:
- Failure of the controlling person to submit a CFC report - a fine of 100 times the minimum subsistence level for an able-bodied person established by law as of January 1 of the tax (reporting) year (UAH 302,800.00 as of January 1, 2025).
- Late submission by the controlling person of the CFC report - a fine in the amount of one subsistence minimum for an able-bodied person established by law as of January 1 of the tax (reporting) year for each calendar day of non-submission, but not more than 50 subsistence minimums for an able-bodied person established by law as of January 1 of the tax (reporting) year (UAH 3,028.00 UAH per day, but not more than 151 400.00 UAH).
When is it necessary to submit CFC reporting?
In 2025, it is necessary to submit a report on a controlled foreign company for 2024.
The deadline for submitting a CFC report for individuals is April 30, 2025 (simultaneously with the submission of an annual declaration of property and income of individuals).
How will the tax authorities find out that I have a CFC?
Information about the beneficial owner of a foreign company can be found on the Internet, as many countries have open company registers. The tax authorities of many European countries, such as Poland, Estonia, Cyprus, the UK and others, can exchange information if they receive a request from the Ukrainian tax authorities.
As a rule, the owner of a foreign company has open bank accounts, and in case of information exchange between countries, such information can be obtained by our tax authorities.
Is it worth exposing yourself to large administrative fines if you can submit CFC reporting and eliminate risks for yourself and your business?
Do I have to pay taxes on my CFC?
The current legislation provides for such an obligation, but there are exceptions that exclude such obligations.
Generally speaking, the controlling person has the following obligations:
- payment of personal income tax in the amount of 18%
- and military duty in the amount of 5% of the CFC's retained earnings for the reporting period.
That is, if, according to the financial statements, the CFC in the reporting year received profit that was not distributed among the owners, the owners have a corresponding obligation to pay taxes on the amount of retained earnings of the CFC.
But, the current legislation also provides for cases when a person is exempt from paying these taxes, namely:
- the total aggregate income of all CFCs of the same controlling person from all sources according to the financial statements does not exceed the equivalent of EUR 2 million at the end of the reporting period;
- the share of passive income of the CFC is not more than 50 percent of the total income of the controlled foreign company from all sources;
- the CFC actually pays income tax at an effective rate that is not less than the basic (main) corporate income tax rate in Ukraine, or is less than such rate by no more than five percentage points (i.e., the corporate tax rate is not less than 13%).
Can I submit reports to the CFC on my own?
Yes, of course.In your taxpayer account, you can find a reporting form and submit a report to the CFC on your own. You can find a lot of useful information about this on the Youtube platform and on the Internet.
But, we would like to draw your attention to the fact that according to the State Tax Service of Ukraine, in 2023, only 405 CFC reports in the short form and 495 CFC reports in the full form were submitted.You can find the statistics for 2023 in our article - CFC Reporting in 2025: Key aspects of reporting for 2024 and responsibilities of controllers.
We have extensive experience in filing CFC reporting, so we recommend contacting Maira Consult, as our lawyers have already worked on the issues of preparing and submitting CFC reporting and have gained positive experience.
Do I have to file a CFC report if I have an inactive company (or an offshore company that does not file reports and does not operate)?
Yes, every CFC owner must file CFC reports, even if the company does not conduct any activities and has not filed reports in its country of registration. In this case, it will be necessary to prepare financial statements in accordance with international standards and submit the relevant CFC reports in Ukraine.
Are CFC notifications and CFC reporting the same thing?
CFC notification is a notification to the tax authorities on the acquisition (beginning of actual control) or alienation of a share (termination of actual control) by a resident of Ukraine in a foreign legal entity or property rights to a share in assets, income or profit of an entity without the status of a legal entity.Simply put, if you have established a company abroad or withdrawn from the shareholders of a foreign company starting from January 1, 2022, you must submit such a notification to the State Tax Service of Ukraine within 60 days. That is, every time you register a foreign company or acquire a share in a foreign company or alienate a share in a foreign company or liquidate such a company altogether, you have an obligation to notify the tax authorities of Ukraine.
Today, many Ukrainians live abroad and have registered foreign companies with the help of foreign providers, registrars or local lawyers. Unfortunately, most of the owners were not informed about the need to submit CFC reports by the local lawyers who assisted in the registration of the foreign company and did not submit CFC reports to the Ukrainian tax authorities within the established deadlines.
Can you help me with filing CFC reports?
Yes, of course. Our specialists already have positive experience in preparing and submitting CFC reports to the tax authorities of Ukraine and can provide the following services:
- Analysis of the structure of your foreign companies
- Determination of the owners' obligations regarding CFC reporting
- Determination of reporting periods for each of the CFCs
- Preparation of CFC reports
- Preparation of annual property and income tax returns
- Support for filing CFC reports
As a result, you will receive confirmation from the tax service that the CFC report was accepted without errors and accordingly, you will properly fulfill your obligations to form and submit CFC reports.
