CIC reporting 2023-2024
In the near future, entrepreneurs in Ukraine will have to resolve many issues related to the preparation and submission of reports to the tax authorities on controlled foreign companies (CFCs). The first reporting period will start in 2024 and will cover the activities of companies in 2022 and 2023. Time for preparation is getting shorter by the day. Tax consultants and experts of Intelligent Solution Group will help you prepare your documents correctly and on time, explain all procedures, check whether the CFC law applies to you specifically, and file reports to the tax authorities for you.
CFC reporting forms
As of May 25, 2023, the Tax Code of Ukraine establishes two CFC reporting forms: a full and an abbreviated form. However, if Law No. 8137 is adopted, the abbreviated form will be canceled and controlling persons will be given an additional year to file the report.
Who is required to file the report?
A full or abbreviated CFC report must be filed by the owners of the companies or persons who have a specified interest in a recognized controlled foreign company. The report must be filed at substantially the same time as the annual property and income tax return or corporate income tax return.
Abbreviated reporting form for CFCs
An abbreviated report form is provided if the controlling person is unable to ensure that the controlled foreign company's financial statements are prepared or to calculate adjusted profits before the deadline for filing the annual property and income tax return or the corporate income tax return. If an abbreviated form is filed, the full report must be filed by the end of the calendar year.
Report filing requirements
The 2022 and 2023 CIC report must be filed in 2024, but if Act 8137 is enacted, the 2023 report will be required to be filed in 2025. A full report and an abbreviated report must be filed for each controlled foreign company separately. The filing of the report is done online, subject to the requirements of the Electronic Document Management Act and the availability of an electronic signature.
A CFC report must be accompanied by certified copies of the controlled foreign company's financial statements showing the amount of profit for the reporting (tax) year. At the moment there is no clear position on which copies should be considered certified. Translation of documents into Ukrainian is recommended; this requirement has not yet been established by law, but is expected after the adoption of Law No. 8137.
Full CFC report form
The full form of the CFC report and the procedure for its completion are specified in the Order of the Ministry of Finance of Ukraine No. 254 dated 25.08.2022. It consists of more than 30 items and contains additional information compared to the shortened form. Determining the type of control, type and ownership structure of a CFC is an important aspect of the full report.
Important points in the full CFC report
Particular attention should be paid to the section on the CFC's financial results, including the amount of income, profit, profit actually paid, and the weighted average official exchange rate of the National Bank of Ukraine for the reporting period. It is also necessary to find out whether the CFC can be exempted from taxation and indicate this in the report. It is also necessary to list all CFC transactions with non-residents, the organizational and legal form of which is approved by the Resolution of the Cabinet of Ministers of Ukraine.
Penalties for failure to file a CFC report
Penalties for CFC-related violations are calculated based on the subsistence minimum for 2023, which is UAH 2,589. Here is how these fines look like:
- Failure to file a CFC report on time will result in a fine of UAH 268,400.
- If the report is submitted with a delay, a fine of UAH 2684 will be imposed for each calendar day of delay, but not more than UAH 134,200 for the entire period of delay.
- Failure to file a report for all CFCs, as well as for all transactions with countries on the Cabinet of Ministers list, will result in a fine of 3% of the amount of CFC income or 25% of the adjusted profit that was not reported, but not more than UAH 2,684,000.
- If the CFC report is not filed within 30 calendar days after the penalty payment deadline, a penalty of UAH 13,420 will be assessed for each day of non-filing.
Given the significant size of these fines, it is recommended to strictly comply with the reporting deadlines and tax obligations in order to avoid financial inconvenience and legal consequences.
However, if you prepare in advance and submit your report on time and in accordance with the law, there will be no negative consequences for your business.
We strongly recommend not to postpone the preparation for the report until January 2024 and start it right now, because:
- closer to the reporting deadline, tax teams will be extremely busy and will not be able to provide business representatives with the necessary assistance;
- you may simply not have time to gather all the information and prepare the report in accordance with the requirements of the tax authorities;
- we also do not recommend preparing a CFC report yourself unless you are a tax lawyer or an international financial reporting specialist. Maintaining CFC reporting requires professional knowledge and experience, which will help you avoid possible mistakes and penalties.
Intelligent Solution Group provides its clients with the following services in connection with CFC reporting:
- Advice on determining whether Ukrainian resident individuals and legal entities have the status of a controlling person. Only persons falling under the definition of the controlling person status are obliged to file CFC reports.
- Advice on determining the tax base, tax rates and the procedure for reporting to the Tax Authorities of Ukraine in case of controlling person status. Clients are provided with information on which tax rates apply to CFC income, as well as on the procedure and deadlines for reporting in accordance with the requirements of the tax authorities.
- Consulting on tax optimization of CFC income and identification of legal ways of exemption from tax on CFC income. Intelligent Solution Group specialists help clients to develop optimal tax strategies and find legal ways to minimize tax liabilities.
- Supporting the procedure of financial and tax reporting on CFC and its submission to the tax authorities of Ukraine. Our company provides our clients with full support in the process of preparation and submission of reporting, ensures compliance with all legal requirements and reporting deadlines.
We are ready to provide qualified assistance and advice on all CFC-related aspects, so that clients can effectively and without unnecessary stress cope with the requirements for preparation and filing of financial and tax reports.