KVK reporting 2023-2024
In the near future, entrepreneurs in Ukraine will have to solve many issues related to the organization and submission of reports to the tax office regarding controlled foreign companies (CFCs). The first reporting period will begin in 2024 and will cover the companies' activities in 2022 and 2023. The time for preparation is getting less and less every day. Tax consultants and experts of the Intelligent Solution Group company will help you prepare documents correctly and on time, explain all the procedures, check whether the law on CIC applies to you, and submit reports to the tax office for you.
Forms of reporting on KIK
As of May 25, 2023, the Tax Code of Ukraine establishes two forms of the CIC report: a full and an abbreviated form. However, if Act No. 8137 is passed, the abbreviated form will be abolished and the controlling entities will be given an additional year to file the report.
Who is required to submit a report?
A full or abbreviated report on CIC must be submitted by company owners or persons who have a certain share in a recognized controlled foreign company. The report must be submitted practically simultaneously with the annual declaration on the state of property and income or the declaration on the income tax of enterprises.
Abbreviated form of report for KIK
An abbreviated form of the report is provided if the controlling person cannot ensure the preparation of the financial statements of the controlled foreign company or calculate the adjusted profit before the deadline for submitting the annual declaration on the state of property and income or the tax declaration on the corporate income tax. In case of submission of the abbreviated form, the full report must be submitted by the end of the calendar year.
Requirements for submitting a report
The CIC report for 2022 and 2023 is due in 2024, but if Law No. 8137 is passed, the 2023 report will need to be submitted in 2025. Full and abridged reports must be submitted for each controlled foreign company separately. The report is submitted online in compliance with the requirements of the law on electronic document circulation and the presence of an electronic signature.
Certified copies of the financial statements of the controlled foreign company reflecting the amount of profit for the reporting (tax) year must be attached to the CIC report. Currently, 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 legislation, but is expected after the adoption of Law No. 8137.
The full form of the KIK report
The full form of the CIC report and the procedure for filling it out are specified in the order of the Ministry of Finance of Ukraine No. 254 dated August 25, 2022. It consists of more than 30 items and contains additional information compared to the abbreviated form. Determining the type of control, type and ownership structure of the CIC is an important aspect of the full report.
Important points in the full report of KIK
Particular attention should be paid to the section on the financial results of KIK, including the amount of income, total profit, actually paid profit, as well as the average official exchange rate of the National Bank of Ukraine for the reporting period. It is also necessary to find out whether an exemption from CIC taxation is possible and indicate this in the report. It is also necessary to indicate all operations of the CIC 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 submit a CIC report
Fines for violations related to the CIC are calculated on the basis of the subsistence minimum for 2023, which is UAH 2,589. Here's what those fines look like:
- Late submission of the report from the CIC will result in a fine of UAH 268,400.
- If the report is submitted late, a fine of UAH 2,684 will be charged for each calendar day of delay, but no more than UAH 134,200 for the entire period of delay.
- Failure to submit a report for all CICs, as well as for all transactions with countries from the list of the Cabinet of Ministers, will result in a fine of 3% of the CIC's income or 25% of the adjusted profit that was not specified in the report, but no more than UAH 2,684,000.
- If the CIC report is not submitted within 30 calendar days after the deadline for payment of fines, a fine of UAH 13,420 will be charged for each day of non-submission.
Given the significant amounts of these fines, it is recommended to strictly adhere to the deadlines for reporting and tax obligations to avoid financial inconvenience and legal consequences.
From January 1, 2022, the controlling person has the obligation to submit a notification about the CIC to the tax office within 60 days from the moment of acquisition, change, alienation or liquidation of the CIC.
However, if you prepare in advance and submit the report on time and in accordance with the law, there will be no negative consequences for the business.
We strongly recommend that you do not delay preparing for the January 2024 report and start now because:
- closer to the reporting deadlines, the 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 collect all the information and prepare a report in accordance with the requirements of the tax authorities;
- we also do not recommend preparing the CIC report yourself, unless you are a tax lawyer or a specialist in international financial reporting. Reporting on CIC requires professional knowledge and experience, which will help to avoid possible mistakes and fines.
The Intelligent Solution Group company provides the following services to its clients in connection with CIC reporting:
- Consulting on determining whether the status of a controlling person is available for individuals and legal entities resident in Ukraine. Only persons subject to the determination of the status of a controlling person are required to submit reports with the CIC.
- Consulting on the determination of the tax base, tax rates and the procedure for submitting reports to the Tax Authorities of Ukraine in the case of having the status of a controlling person. Clients are provided with information on which tax rates are applied to the income of CICs, as well as on the procedure and deadlines for submitting reports in accordance with the requirements of tax authorities.
- Consulting on tax optimization of CIC income and determination of legal ways of exemption from paying tax on CIC income. Intelligent Solution Group specialists help clients develop optimal tax strategies and find legal ways to minimize tax liabilities.
- Support of the procedure for the formation of financial and tax reporting for the CIC and its submission to the tax authorities of Ukraine. Our company provides clients with full support in the process of preparing and submitting reports, ensures compliance with all legal requirements and reporting deadlines.
We are ready to provide qualified assistance and advice on all aspects related to CIT, so that clients can effectively and without unnecessary stress cope with the requirements for the preparation of statements and choose the most profitable tax strategy for themselves and their business.