How a CFC can avoid paying tax in Ukraine

20th of November, 2023

The letter of the Ministry of Finance dated 09.08.2021, No. №11210-09-62/24813 provides clarifications regarding the application of the tax rule on exemption from profit tax for controlled foreign companies.

According to the document, the adjusted profit of a CFC is not part of the total taxable income. Businesses do not have to pay this tax if there is a valid treaty between Ukraine and another country on avoidance of double taxation or on exchange of tax information - as one of the conditions.

Other conditions:

  • if your share in the company is less than 50%, you are not subject to this law;
  • if you own more than 10% of the company, but together with other Ukrainian resident owners this figure exceeds 50%, you still need to report;
  • if you actually control a foreign company, the law applies to you regardless of the amount of your share. This applies to situations where the resident not only invests in the company and receives profit from it, but also directly manages the company, having a decisive influence on it.

But still the main prerequisite for exemption from taxation is the presence between Ukraine and the other jurisdiction of the above-mentioned treaties. The essence of the treaties is that both parties provide each other with administrative assistance, i.e. transfer information that may be relevant to the application of domestic taxation laws.

If the need arises, one party transmits to the other a request for information that relates to certain persons or transactions. 

In order to run your business legally and not make a mistake, you do not have to learn all the legal and tax regulations on your own. You can delegate this task to tax lawyers from Intelligent Solution Group, so that you don't have to pay extra money to the tax authorities if you are not supposed to.

CFC consulting includes the following services:

  • legal analysis of the structure of the foreign company and determination of the CFC status for individuals and legal entities that are residents of Ukraine;
  • analysis of tax rates, algorithm of submission of reporting documents to the tax authorities of Ukraine (if the CFC status is determined);
  • analyzing the grounds for exemption from taxation in Ukraine;
  • preparation of the company's financial statements and support of the client in the course of filing such statements.

The specialists of Intelligent Solution Group have impeccable knowledge of tax legislation and vast experience in dealing with tax authorities. If you use the services of such professionals, you will minimize the risks for your company and can be sure that you operate in accordance with every letter of the law.