CFC consulting and tax reporting support
It is important for every owner or person in Ukraine controlling a foreign company to notify the tax authority in time and submit CFC financial statements until 1 May 2024 (for individuals and legal entities) in order to protect themselves from claims and fines from the fiscal authorities, for this purpose we advise to order CFC consulting from the specialists of Intelligent Solution Group.
Who may be interested in this service
- Ukrainian resident individuals who are founders or beneficiaries of foreign companies;
- Ukrainian legal entities controlling foreign companies.
Ukrainian residents are obliged to pay tax on that part of the CFC's profit which is proportional to the controlled person's share.
Filing of CFC reporting. In case of late filing or failure to file this report, the controlled person will be liable to penalties. Trust the tax lawyers and accountants from Intelligent Solution Group to solve these problems.
Intelligent Solution Group's range of CFC services
CFC consulting includes the following services:
- Legal analysis of the structure of foreign companies and determination of controlling person status of Ukrainian resident individuals and legal entities.
- Legal analysis of CFC profit tax rates, procedure for reporting to the Tax Authorities of Ukraine in case of determination of the Controlling Person status.
- Legal analysis of the grounds for CFC tax exemption in Ukraine.
- Preparation of the company's financial statements in accordance with IFRS and support in filing CFC tax returns with the Ukrainian tax authorities.
1. Legal analysis of the structure of foreign companies and determination of controlling person status of Ukrainian resident individuals and legal entities.
CFC reporting regulations became effective in Ukraine from the beginning of 2022. The authorities are adopting new laws to introduce BEPS (Base erosion and Profit Shifting) rules in the country, which ensure control over possible profit shifting from taxation. Our experts will help to determine whether a Ukrainian resident who owns a share in the capital of a foreign company falls under the definition of a controlling person.
Algorithm of our actions:
- Identification of the client's presence of the status of a controlling person in relation to a foreign company.
- Advice on the obligations of a Ukrainian resident as a controlling person to the fiscal authority.
2. Legal analysis on CFC profit tax rates, procedure for reporting to the Tax Authorities of Ukraine in case the status of a Controlling Person is determined.
If a resident of Ukraine falls under the definition of the status of a controlling person of a CFC, he/she has obligations to pay tax on the CFC's profits. Intelligent Solution Group specialists will help to calculate the tax base and the amount of taxes, as well as generate a CFC report for the tax authorities.
Algorithm of our actions:
- Determination of the tax base according to which the tax should be paid.
- Advising on the tax rates depending on when the CFC income is distributed.
- Advising on the deadlines for CFC reporting.
With our help, you will gain an understanding of all stages of CFC reporting.
3. Legal analysis of the grounds for tax exemption of CFCs in Ukraine.
The current Ukrainian legislation has norms defining exceptional cases when the profit of a CFC is not subject to taxation. Knowing these conditions, you will be able to legally optimise your taxes and increase your income.
Our experts will help you analyse the compliance of a foreign legal entity with all the conditions exempting it from taxation on Ukrainian territory, including SIDN (Double Tax Treaty) agreements with other states.
4. Preparation of the company's financial statements in accordance with IFRS and support in filing CFC tax returns with the Ukrainian tax authorities.
The new legislation obliges controlling persons to file an annual CFC report for each firm separately. This must be done together with the filing of personal income and corporate income tax returns.
Our services include support of the process of filing reports on controlled foreign companies.
The algorithm of our actions:
- Obtaining information from the client on controlled foreign structures.
- Analysing and verifying financial statements with respect to the risks of additional tax assessment.
- Preparation of CFC reports.
- Drawing up a notification to the tax authorities on the acquisition of a stake or termination of participation in a CFC.
Why trust the experts Intelligent Solution Group
Our experts have extensive experience in communicating with tax authorities and working in the legal field of Ukraine.
Knowing the specifics of the national legislation we help our clients to correctly prepare and submit CFC reporting on time.
We are aware of all tax and legislative changes, so we can warn the client and help him to prepare for any reporting on his company in advance, so that there are no stressful situations.
Our task is to protect our client's assets and protect them from risks.
CFC reporting should not be delayed, as teams are already busy, and it will be virtually impossible to manage everything in time for the beginning of 2024.
What is CFC?
A controlled foreign company (CFC) is an organisation legally incorporated in a foreign country and supervised by a resident of Ukraine, which can be either an individual or a legal entity.
A legal entity is a legal structure, association or organisation that has the right to own property, exercise rights and obligations, and carry out activities in its own name, regardless of founders, participants and form of ownership. A controlled foreign company has the status of a legal entity according to the rules of the legislation governing its registration. A foreign legal entity deprived of the status of a legal entity may be treated on an equal footing with a CFC.
An entity without legal personality is a legal entity formed by means of a transaction or legally registered in accordance with the rules of another foreign state or its territory, without granting this entity the status of a legal entity; it is authorised to carry out activities for profit in the interests of its participants, partners, founders or other persons wishing to benefit.
Entities without legal personality may include: partnerships, trusts, foundations, and other institutions and organisations. Non-resident entities are equated to entities without legal personality whose legal form of organisation is included in the list approved by the Cabinet of Ministers of Ukraine and which do not fall within the definition of legal entities under the applicable legislation.
Tax rates for CFCs
The applicable tax rates for taxation of income of Controlled Foreign Companies (CFCs) are as follows:
Legal entity: 18% rate on the amount of the CFC's profits.
An individual pays one of the rates and a military levy:
- 18% rate - tax on the CFC's undistributed profits if the company has not distributed the CFC's profits to shareholders before filing the report;
- 9% rate - tax on CFC's profit after dividend distribution before filing the report;
- 5% rate - if the amount of CFC profit is received in the form of dividends from residents of Ukraine;
- military levy - 1.5 per cent is paid.