Filing a notification on controlled foreign companies (CFCs)

As of January 1, 2022, the Tax Code of Ukraine introduced the concept of Controlled Foreign Companies (CFCs).

One of the main obligations of the owners of controlled foreign companies is to notify the tax authorities of the fact of acquiring or losing control over the CFC:

• On the incorporation/establishment of a foreign company;
• Acquisition of corporate rights/shares of a foreign company or commencement/termination of effective control over a CFC;
• Alienation/sale of corporate rights/shares of a foreign company;
• Liquidation of a foreign company.

In accordance with the legislation of Ukraine, resident individuals and resident legal entities are obliged to send a Notice within 60 days from the date of acquisition (commencement of actual control) or alienation of a share (termination of actual control) of a share in a foreign legal entity, property rights to a share in assets, income or profit of an entity without the status of a legal entity; commencement/termination of actual control over a foreign legal entity. The notification is sent to the supervisory authority at the main place of registration of the resident individual and the main place of registration of the resident legal entity.

In simple terms, if you have acquired a share in a foreign company or registered a new company, you must send a notification of such acquisition. If you have sold your share in a foreign company or liquidated a company, you must send a notification of loss of control to the Ukrainian tax authorities. If you have registered several foreign companies during a calendar year and sold some shares in them to other persons, you must submit a notification of acquisition or loss of control for each of the foreign companies separately.

We also note that the obligation to send these notifications to the tax authorities will only arise in the case of acquisition/loss of control of a CFC that occurs after January 1, 2022.

In addition, it is important to note that failure to comply with these obligations is subject to penalties. In particular, if a person fails to submit a notification within 60 calendar days from the date of acquisition/loss of control over a CFC, he/she may be subject to a fine in the amount of 300 subsistence minimums for able-bodied persons, which will be UAH 908,400 as of January 1, 2024.

In this regard, we advise you to check whether you, as the owner of a foreign company, are obliged to file a notification on the acquisition/loss of control of a CFC after January 1, 2022.

As this issue is quite complex and requires professional analysis, CFC owners may have a number of questions that our experts can help to clarify:

·       Analyzing the CFC structure and potential risks for CFC owners;

·       Identification of CFC transactions that may trigger obligations to notify of the acquisition/loss of control over the CFC;

·       Expediency of CFC liquidation;

·       Determining the circle of controlling persons of a CFC.

If you have any questions on how to properly file a notification on the acquisition/loss of control of a CFC, Maira Consult can assist you as we have extensive experience in these matters and a significant number of successful cases of filing such notifications with the tax authorities.