Since 2017, Ukraine has been part of the BEPS initiative, introducing measures like CFC legislation to counter the negative impact of offshore structures on the economy.
With the enactment of Law №466-IX in 2022, Ukrainian residents—both individuals and businesses—holding stakes in foreign entities are required to notify tax authorities about their CFCs and file corresponding reports.
This shift raised numerous concerns for foreign business owners. Ambiguities in the law, coupled with insufficient guidelines from the State Tax Service, have made compliance challenging. Draft Law №8137, intended to provide more clarity, is still awaiting a second reading as of early 2025.
Amid this legal uncertainty, a growing number of Ukrainians are moving or establishing businesses abroad. Keep in mind that Ukrainian residents must notify the authorities about newly registered foreign businesses within 60 days.
When Is a CFC Notification Required?
A notification must be submitted in these cases:
- Acquiring ownership of a share or property rights in entities other than legal organizations.
- Transferring ownership of a business share or losing control over a company, resulting in the end of controlling-person status.
- Gaining actual control over a foreign legal entity.
- Liquidating rights, shares, or profit claims in a foreign entity.
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Why Ukraine Adopted CFC Legislation
CFC rules in Ukraine were implemented to combat tax avoidance and enhance transparency in financial activities. The primary goal is to ensure Ukrainian residents do not use foreign companies to shield income or reduce tax liabilities unfairly.
Key Objectives of CFC Legislation:
- Taxing Foreign Entities: Establishing frameworks to impose taxes on income derived from foreign companies controlled by Ukrainian residents.
- Promoting Transparency: Giving tax authorities access to comprehensive data on the operations of foreign businesses to improve tax oversight.
- Meeting International Standards: Aligning national legislation with global norms, particularly the BEPS (Base Erosion and Profit Shifting) initiative aimed at addressing tax evasion.
These regulations have been in force since January 1, 2022. They apply to Ukrainian residents—both individuals and legal entities—who hold stakes in or exercise control over foreign companies.
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CFC Reporting Requirements
Residents must file CFC reports by May 1 of the year following the reporting year. For instance, reports for 2024 must be submitted by May 1, 2025. If the fiscal year of the foreign entity differs from the calendar year, the report should include data for the relevant financial period.
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What Are the Reporting Formats for CFCs in Ukraine?
Ukraine provides two main formats for reporting Controlled Foreign Companies (CFCs):
Full Report. Identifier for Legal Entities: J0108701, Identifier for Individuals: F0108701. This format is used when it’s possible to submit a comprehensive report and calculate adjusted profit. It includes detailed information about the company’s financial performance, ownership structure, and other essential data.
Simplified Report. Identifier: F0108601. This version is submitted when the CFC’s financial statements are unavailable at the time of filing. It only contains basic details, such as identification information, the controller’s share size, and ownership structure.
CFC Reporting Deadlines
The CFC report must be submitted by May 1 of the year following the reporting period.
What if the Foreign Company’s Fiscal Year Differs from the Calendar Year?
In many countries (e.g., Canada, the UK, the USA), the fiscal year begins on the company’s registration date and spans 12 months. Such companies usually have 6 to 12 months to prepare financial statements. However, in Ukraine, the CFC report must be filed by May 1.
Example:
Example:
- In 2025, you’ll need to submit a report for the fiscal year ending in 2024 (covering the 2023–2024 period).
- If financial statements are unavailable, a simplified report without profit data must be submitted.
- If the fiscal year includes prior months, the report should reflect relevant data. Additional financial results for other periods (e.g., 2023–2024) can be included in the next year’s report.
For the latest reporting forms and legislative updates, visit the official website of the State Tax Service of Ukraine.
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