Penalties for violation of CFC reporting rules
Ukraine now has regulatory rules for controlled foreign companies (CFC), and wartime is not a reason to abolish these rules.
An individual or legal entity that is a resident of Ukraine and has a business abroad must submit certain documentation to the tax service:
- Notification of obtaining CFC status or liquidation of business abroad. You can read about the rules of preparation in the decree of the Ministry of Finance of Ukraine No. 512 dated 22.09.2021;
- CFC report. This document is submitted every year, simultaneously with the declaration of property status and income. This norm is regulated by paragraph 54 of subsection 10 of section XX "Transitional Provisions" of the Tax Code of Ukraine.
The Tax Service recommends all owners of foreign business to study the conditions of CFC status, as not all individuals and legal entities operating in another country fall under this definition.
Let us consider the penalties that apply to entrepreneurs for violations of CFC reporting rules:
- failure to submit an annual CFC report - UAH 268,400;
- untimely submission of the report - up to UAH 134,200;
- absence of information about all operating CFCs in the report - up to UAH 2,684,000. The penalty is either 3% of the income or 25% of the adjusted profit of the CFC for the respective year, which was not reflected in the report - depends on which amount is higher. Penalties are applied for all unreported amounts and/or for all facts of failure to inform;
- failure to notify about obtaining the CFC status or liquidation of the business - UAH 805,200;
- failure to submit CFC documentation after receiving a request from the controlling authority - up to UAH 2,684,000. The amount of the fine is 3% of the income of the CFC for which the documents were not submitted;
- failure to submit a CFC report within 30 calendar days following the last day of the deadline for payment of the fine - up to UAH 805,200.
No penalties are provided for late filing of notification on obtaining the CFC status or liquidation of a business for the time being. An entrepreneur must submit notifications and reports for each foreign company separately.
Payment of fines does not exempt from the need to submit the relevant documents to the regulatory authorities.
How to get help if you have CFC status
Any red tape related to taxes and paperwork is a hassle. You have to spend effort and time, and there is no guarantee that you will not make a mistake for which you will have to answer. To eliminate the risk of such a situation, use the services of professionals: our specialists provide the service "CIC consulting and tax reporting support".
Intelligent Solution Group employees:
- will support you in the process of preparation and submission of CFC reporting;
- provide explanations regarding the rate of taxes to be paid;
- explain how the tax base is determined;
- take care of the documentation.
Important: Intelligent Solution Group helps some categories of CFCs to be exempted from paying taxes in Ukraine, if the subject of CFC falls under such exemption.
By May 1, 2024 you need to file the reports, do not delay, as from January 2024 all teams will be maximally loaded and you may not have time.