In Ukraine, a tax control system operates that obliges residents to disclose information about foreign companies owned by them. Within the framework of these rules, controllers must provide data on controlled foreign companies (CFCs), their financial results, ownership structure, and the amount of profit.

 

Preparation and submission of CFC reporting require strict compliance with legislative requirements. Errors in reporting documents or inaccuracies in data may lead to penalty sanctions.

 

What Is a CFC Report and Who Is Required to Submit It in Ukraine

CFC reporting is a tax document submitted by a resident of Ukraine who is a controller of a foreign company.

 

Submission of CFC reports in Ukraine allows tax authorities to analyze the financial indicators of such organizations and determine possible tax liabilities of residents.

 

What Is a Controlled Foreign Company (CFC)

A CFC is a company or another entity registered outside Ukraine that is under the control of a Ukrainian resident.

 

Within the framework of the current legislation, this may be:

 

  • a foreign company that has the form of a legal entity;
  • an organization without the status of a legal entity (for example, a trust, fund, or partnership);
  • another structure through which assets are owned or business activities are carried out outside Ukraine.

 

At the same time, not only the formal registration of the company is important, but also the actual control over its activities. If a resident of Ukraine makes management decisions, influences the distribution of profits, or disposes of the assets of such a structure, it may be recognized as a CFC in accordance with the requirements of tax legislation.

 

Who Can Be a CFC Controller

This is an individual or legal entity – a resident of Ukraine – that exercises decisive influence over the activities of a foreign company or another foreign structure.

 

A person recognized as a controller is obliged to submit a CFC report, disclose the financial indicators of the foreign company, provide the necessary documents, and calculate taxable profit.

 

Control Criteria Under Ukrainian Legislation

The rules established by the Tax Code of Ukraine make it possible to determine whether a resident has a significant influence on the activities of a foreign company or another structure.

 

Control over a CFC is considered established if a resident of Ukraine:

 

  • Owns more than 50% of the shares or participation rights in a foreign company.
  • Owns more than 10%, provided that the aggregate share of Ukrainian residents in such a company exceeds 50%.
  • Exercises actual control over the management of the organization, including the ability to make strategic decisions, appoint managers, or influence the distribution of profits.

 

In addition, when such control arises or terminates, the resident is obliged to timely submit a notification about a CFC in Ukraine. This document informs the tax authorities about the existence of a CFC and is a mandatory element of tax accounting.

 

Why CFC Reporting Is Required and What the Risks Are in Case of Non-Compliance

The main purpose of introducing these rules is to increase the transparency of international ownership structures and prevent the use of CFCs for tax avoidance.

 

Tax authorities receive the ability to:

 

  • Control the profits of foreign companies and analyze the sources of their formation.
  • Check tax compliance and the correctness of income reporting.
  • Prevent the transfer of profits to low-tax or offshore jurisdictions.
  • Track international corporate structures connected with residents of Ukraine.

 

If a controller does not submit a CFC report or makes mistakes when completing the form, the following consequences are possible:

 

  • significant fines;
  • additional assessment of taxes on CFC profits;
  • sending requests from the tax service to provide documents and explanations.

 

Therefore, preparation of CFC reporting requires careful analysis of financial data, correct documentation, and often professional legal support.

 

Deadlines for Submission and Forms of CFC Reporting

A CFC report is submitted in the form approved by the legislation of Ukraine within the deadlines established for the submission of the annual tax declaration of the controller.

 

If the tax service sends an additional request regarding the information specified in the document, it is important to prepare a response in a timely and correct manner. More details about this can be found in the material “How to Properly Respond to a Tax Authority Request Regarding a CFC.”

 

What a CFC Report Includes: Structure and Content

CFC reporting contains comprehensive information, and its main sections include:

 

  • full information about the controller;
  • data on the foreign company, including the country of registration and the organizational and legal form;
  • information about the ownership structure and the share of participation of the resident;
  • financial indicators and calculation of CFC profit for the reporting period;
  • information about taxes paid in the foreign jurisdiction.

 

In some cases, additional materials confirming the company’s financial data and the correctness of calculations may be attached to the report (for example, audit opinions, financial statements, and accounting documents).

 

Step-by-Step Instructions: How to Prepare and Submit a CFC Report

Preparation and submission of CFC reporting require careful analysis. In order to correctly complete the information, the controller should consistently go through several stages of preparation.

 

Collection of the Required Source Documents

First, it is necessary to collect the main materials related to the activities of the controlled foreign company.

 

These include:

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  • constituent documents of the CFC;
  • financial documentation or accounting data;
  • company contracts and corporate agreements.

 

In addition, information about the ownership structure and the shares of participants is required.

 

Systematization of CFC Data

At this stage, the data should be organized and the key performance indicators of the foreign structure should be determined:

 

  • the exact amount of CFC profit for the reporting period;
  • the structure of income and the sources of its receipt;
  • possible tax liabilities.

A check of the compliance of the obtained data with the requirements of Ukrainian tax legislation is carried out.

 

Completion of the CFC Reporting Form

This stage is one of the most important. When completing the form, it is necessary to correctly indicate the controller’s data and information about the CFC. It is also required to include the main financial indicators and the calculation of the profit of the controlled foreign company.

 

Checking for Possible Errors

 

Before submitting the document, it is recommended to carry out an additional review of all information:

 

  • detailed analysis of documents;
  • tax audit of calculations;
  • assessment of the correctness of financial indicators and profit.

 

The verification makes it possible to identify possible inaccuracies and reduce the risk of sanctions.

 

Submission Through the Electronic Cabinet

Submission of CFC reporting is carried out through the electronic taxpayer’s cabinet. This method allows information to be quickly sent to the tax authorities and confirmation of its registration to be obtained.

 

The CFC controller must do the following:

 

  • Prepare the reporting document.
  • Sign it with a qualified electronic signature.
  • Send the file to the tax service through the electronic cabinet.

 

After submission, it is recommended to keep confirmation of submission and copies of all documents related to the CFC for possible inspections or requests from the tax authorities.

 

Specifics of CFC Reporting in Different Situations

Depending on the company’s structure, the period of its activity, and the availability of financial data, preparation of the CFC report may have certain specific features.

 

If the CFC Has No Financial Statements

Sometimes a foreign company does not maintain full reporting or does not prepare it according to the standards adopted in Ukraine. In such a case, the controller must independently determine financial indicators based on the available information:

 

  • bank statements;
  • accounting documents;
  • contracts;
  • data on income and expenses.

 

This information is used as the basis for calculating CFC profit and completing the reporting form.

 

If the CFC Report Is Submitted for the First Time

When submitting the report for the first time, it is important to correctly determine the key parameters related to the emergence of control over the foreign company. Errors at this stage may lead to inaccuracies in further reporting.

 

Special attention should be paid to:

 

  • the date of the emergence of control;
  • the ownership structure and the resident’s share of participation;
  • financial indicators of the CFC for the reporting period;
  • information about profit distribution.

 

It is also recommended to conduct an additional analysis of the company’s documents to ensure the correctness of the provided data.

 

If the CFC Was Established / Liquidated During the Reporting Period

In this case, CFC documents are submitted only for the period of its actual activity. It is necessary to correctly determine the time frame of the reporting period. The date of registration and the date of termination of activity or liquidation of the company should be indicated, as well as the financial results for the time of its actual existence.

 

Tax Consequences and Calculation of CFC Profit

CFC profit is calculated on the basis of the provided data for the relevant reporting period. At the same time, certain adjustments provided by tax legislation may be applied. They allow financial indicators to be brought into compliance with the requirements of Ukrainian tax rules.

 

When determining profit, taxes that were paid by the company in a foreign jurisdiction are also taken into account. In some cases, such payments may be considered when calculating the tax liabilities of the controller.

 

Tax is subject to payment in Ukraine:

 

  • if the CFC profit was not taxed abroad;
  • if the level of taxation in the foreign jurisdiction is lower than that established by Ukrainian legislation.

 

Therefore, the correct determination of profit and the proper reflection of data in the tax declaration are of significant importance for compliance with the current requirements.

 

Typical Mistakes When Completing a CFC Report

In practice, controllers often face difficulties when preparing documents related to controlled foreign companies. Insufficient knowledge of legislation or inaccuracies when completing the form may lead to additional questions from the tax authorities or even to the application of penalties.

 

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The most common situations that occur when preparing a CFC report include:

 

  • provision of documentation not in full;
  • errors in the calculation of CFC profit;
  • incorrect completion of the established form;
  • indication of inaccurate data about the ownership structure.

 

In addition, problems may arise due to inconsistency of financial data, absence of supporting documents, or untimely submission of the report. Such shortcomings may become grounds for additional requests from the tax service.

 

How to avoid CFC penalties? For this purpose, it is important to carefully check the collected documents, thoroughly prepare the CFC report, and comply with legislative requirements. In complex or ambiguous situations, it is advisable to consult with specialists.

 

When Is It Worth Seeking Legal Support?

This is relevant in situations where preparation of CFC reporting, analysis of the financial data of a foreign company, and verification of the correctness of the profit calculation are required.

 

Legal support is recommended if:

 

  • the ownership structure is complex and includes several CFCs;
  • the company has a network of foreign branches or subsidiaries;
  • calculation of profit according to international standards is required;
  • the tax service has sent an official request or requires additional documents.

 

Professional assistance makes it possible to properly organize the preparation of documents, assess the corporate structure, and ensure the correct reflection of the financial indicators of the CFC.

 

How Lawrange Supports the Preparation and Submission of CFC Reporting

AA Lawrange provides comprehensive services for CFC support and legal assistance to controllers at all stages of interaction with the tax authorities.

 

Specialists of our company help to:

 

  • Determine the status of the controller and the existence of control over a foreign company.
  • Prepare a set of the necessary CFC materials.
  • Conduct an audit of financial indicators.
  • Correctly complete the reporting form.
  • Submit documents through the taxpayer’s electronic cabinet.

 

Lawyers of Lawrange can also provide consultations on CFC taxation issues and help prepare responses to requests from the tax authorities.

 

Conclusions

CFC reporting is mandatory for controllers of foreign companies who are residents of Ukraine. It acts as an important instrument of tax control. Compliance with legislative norms makes it possible to ensure transparency of the activities of foreign structures and correctly reflect financial results.

 

The process of preparing CFC documents includes collecting the necessary materials, analyzing financial data, calculating profit, and correctly completing the established form. Timely submission of information helps to avoid penalties and possible tax disputes.

 

FAQ

Who is required to submit CFC reporting?

CFC reporting must be submitted by individuals and legal entities – residents of Ukraine – who are controllers of foreign companies.

 

What is the deadline for submitting a CFC notification in 2026?

A CFC notification is submitted when control over a foreign company arises or terminates. The specific deadline depends on the date when such control arise

 

Can CFC reporting be submitted independently?

Yes, the controller can independently prepare and submit a CFC report through the taxpayer’s electronic cabinet. However, in the case of a complex structure of foreign companies, it is recommended to use professional legal services.

 

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