January is coming to an end, which means that the campaign with reporting on controlled foreign companies (CFCs) for 2024 is gaining momentum. We remind you: by April 30, 2025, you need to prepare and submit CFC reporting to avoid fines in the future and unnecessary risks.
Despite the absence of penalties during martial law, compliance with tax legislation remains an important factor in ensuring transparency of financial flows and avoiding possible risks in the future.
Who submits reports to CFCs? Figures from the tax authorities
According to the official data of the State Tax Service of Ukraine, in 2022-2023, 15,698 controllers submitted 39,058 reports on 23,689 CFCs registered in 119 countries. This confirms the growing responsibility of business and the effectiveness of the new tax control system.
It is worth noting that:
- 28 509 reports were submitted in full;
- 10,549 - in the shortened form;
- Individuals submitted 38,084 reports;
- Legal entities - 974 reports;
- The most popular country for registration is Poland (23.2%);
- The second place is occupied by Cyprus (11%);
- The top 5 also includes: USA (9.4%), UK (9.1%) and Estonia (7.5%);
- The other 114 countries of registration account for about 40%;
- The total amount of taxes accrued based on the results of the declaration exceeded UAH 2 billion;
- Since May 2024, the amount of declared tax payable has increased by another UAH 246.1 million.
How to report CFCs?
CFC reporting in 2025 is submitted to the State Tax Service of Ukraine through the taxpayer's electronic account or specialized tax reporting programs. It is important to prepare the documents in advance and check the correctness of filling out the form.
Step-by-step instructions for reporting on CFCs
1. Preparing a CFC report. If you become the owner or controlling person of a foreign company, you must file a CFC report with the tax authorities within 60 days from the date of acquisition of the share. The CFC report should include the company's financial performance, ownership structure, profits, tax liabilities and other data.
3. Formation and submission of reports. The CFC report is submitted together with the annual income tax return. To do this, you can use the taxpayer's electronic account or submit documents in person to the tax service.
4. Payment of tax liabilities. If the CFC's profit is subject to taxation, the controlling person must pay the relevant taxes in Ukraine.
5. Compliance with deadlines. CFC reporting for 2024 must be submitted by CFCs in 2025 by April 30. Failure to meet the deadlines may result in penalties.
How does the tax office find out about CFCs?
Owners of foreign companies often ask: how does the tax office get information about their share in a foreign business? Thanks to international agreements and automatic exchange of financial data, regulatory authorities have various mechanisms for identifying CFCs. Let's consider the main ones.
1. Automatic exchange of financial information (CRS)
Ukraine participates in the international standard of automatic exchange of financial information (CRS), which provides that banks and financial institutions of participating countries transfer information about non-resident accounts to tax authorities. This means that if you have a foreign business with accounts in banks abroad, the tax authorities can obtain information about the company's cash flow, account balances, and other beneficiaries.
2. Exchange of information between countries (double taxation treaties)
Ukraine has double taxation treaties with many countries that contain provisions on the exchange of tax information. Under such agreements, the tax authorities may request information about business owners, dividends, profits and other financial indicators.
3. Banking Compliance and KYC Procedures
Ukrainian banks and financial institutions carry out Know Your Customer (KYC) procedures and financial monitoring. If you open an account for a foreign company or as an individual with income from abroad, the bank requests information about the ownership structure, beneficiaries, and sources of funds. In the event of suspicious transactions or inconsistencies with declared income, the bank may transfer this data to the relevant authorities.
4. Open company registers
Many jurisdictions have open or available upon request registers of beneficial owners.
5. Disclosure by third parties
In cases of litigation, bank audits or in cooperation with international partners.
6. Inquiries from tax authorities
The tax authorities may send inquiries to foreign tax authorities or obtain information through diplomatic and official channels.
Controlling authorities have wide access to information about CFCs due to their established cooperation with foreign countries and extensive experience in transfer pricing. In order to avoid possible sanctions and financial risks, we recommend submitting CFC reporting in a timely manner and complying with tax requirements.
Penalties for violation of tax laws
Although penalties are not applied during martial law, they may be resumed after its termination. Law No. 4113-IX stipulates that fines will not be imposed for violations in the period from January 1, 2022 to six months after the end of martial law. However, after that, fines for failure to submit or late submission of reports can reach significant amounts.We recommend not to postpone the submission to the last day of submission.
How to avoid risks when submitting CFC reports in 2025
Submitting CFC reporting is a complex and responsible process that requires a deep knowledge of tax legislation. Maira Consult Law Firm offers comprehensive services for the preparation and submission of CFC reporting 2025, helping businesses minimize risks and avoid fines.
Partner of the company Volodymyr Kucheriavyi notes that many clients who open companies abroad, often do not know about the obligation to file a CFC notification. This happens for various reasons. Foreign company registrars may not inform about this obligation because they do not know the nuances of Ukrainian law. In addition, local consultants sometimes do not inform clients about the need to file reports.
Also, incorrect or untimely submission of CFC reports in 2025 may result in significant financial penalties. Maira Consult's team of lawyers provides professional support at all stages of CFC reporting. We offer:
- CFC consultations - analysis of your situation and development of a tax strategy;
- Preparation and submission of a notification on CFC;
- Formation and verification of the package of necessary documents;
- Correct completion of CFC reporting in accordance with the legislation of Ukraine;
- Submission of reports to the tax authorities;
- Analysis of tax risks and minimization of financial consequences.
Don't postpone the submission of CFC reporting until the last minute! Contact Maira Consult today to avoid tax risks and ensure the stable development of your business.
