Submission of CFC Reporting in Ukraine

Ukrainian taxpayers who own businesses abroad must notify the tax authorities of Ukraine about this, submit the corresponding reports annually, and pay taxes to the budget of our country starting from 2022. At the same time, CFC reporting is a much more complex type of reporting than, for example, a tax declaration. The collection and processing of the necessary information and documents can take several weeks. Significant fines are imposed for violations according to the law.

Although last year the parliament made concessions and postponed the imposition of fines until the cancellation of martial law + 6 months, it is still better to submit the CFC report for 2025. Moreover, if you submit a shortened report by May, don’t forget to submit the full report by the end of the year. Failure to submit this report after the cancellation of martial law may turn into an unexpected and excessive burden, as it will concern reports for many years at once.

Lawrange offers comprehensive assistance in resolving issues related to CFC legal support: from consultations on the possibilities of avoiding the controller status to preparing a complete package of documentation for submission to the controlling authorities of Ukraine. With years of experience in supporting international business, we find it easy to prepare reports according to IFRS (International Financial Reporting Standards) requirements, as well as to offer non-standard solutions for non-resident companies.

Concept of “Controlled Foreign Company”

Following the path of implementing the global anti-BEPS (Base Erosion and Profit Shifting) program, our country inevitably introduced reports on CFCs – Controlled Foreign Companies. Such regulations are enshrined in Law No. 466-IX, adopted on January 16, 2020, which provides for amendments and additions to the Tax Code (adding Article 39-2) and came into effect on January 1, 2022.

Important! According to the provisions of Law No. 466-IX, a controlled foreign company is a business entity registered in a foreign country either as a legal entity or without such status, which is controlled/managed by a Ukrainian resident (either a company or an individual).

***Note: Structural entities without the status of a legal entity include: a) partnerships (including English and Scottish); b) funds; c) trusts; d) other organizations, the creation and activities of which are regulated by agreements and the legislation of the foreign country.

Please note! According to the generally accepted definition, a controlled foreign company is a legal entity conducting its activities in one country (an offshore) but owned or controlled by tax residents of another state. These companies are often created in jurisdictions with minimal taxes, known as “tax havens.” There are tax haven blacklists, and being on such a list can result in a country losing the opportunity for full international economic activity and conducting international financial transactions.

Who Should Submit CFC Reporting

The legislation of our country states that the submission of CFC reports is the responsibility of controlling persons who are residents of Ukraine and hold a sufficient share in a foreign company.

As experience shows, reports must be submitted for almost every offshore company, regardless of its status.

In particular, the CFC report should be provided by the following companies:

• an actively operating company;
• an inactive (dormant) CFC, which does not engage in business activities;
• a sold or liquidated company (a notification of loss of control over the CFC is submitted);
• a CFC exempt from taxation;
• a foreign company, regardless of whether it made a profit in the reporting period.

This means that every Ukrainian resident controlling a foreign company must submit annual reporting, regardless of the company’s activity and profitability.

What You Need to Know About CFC Reporting in 2026

The deadline for submitting the CFC report for 2026 (for the year 2025):

• By March 3, 2026, for legal entities, together with the profit tax declaration;
• By May 1, 2026, for individuals, together with the annual declaration of property status and income.

Please note! The CFC report form, the procedure for its completion, and submission to the controlling authority were approved by the Ministry of Finance order No. 254 dated August 25, 2022.

As before, in 2026, both full and shortened CFC reports can be submitted. A shortened form may be submitted if the controlling person has not yet submitted the tax declaration and financial statements in the country of registration of the foreign company by March 3/May 1, 2026. However, by the end of 2026, the controlling person is required to submit the full CFC report.

Which Entities Fall Under the Definition of “Controlling Person”?

Important! The definition of “controlling person” refers to individuals and legal entities who are residents of Ukraine, direct owners/indirect (mediated) controllers of a foreign business entity (offshore, midshore, onshore).

***Note: For individuals, Ukrainian citizenship is not a mandatory condition. In this context, it refers to tax residency.

The criteria for determining controller status under the law are as follows:

• ownership of more than 50% of shares in a non-resident legal entity;
• ownership of more than 10%, when the total share of all Ukrainian residents exceeds 50%;
• actual control over a legal entity (solely/with related persons controlling assets, income, and making management decisions).

In this context, “share” refers to corporate rights and other similar powers that establish:

• influence over a significant percentage of votes at a general meeting;
• receipt of part of the income;
• receipt of part of the assets in case of liquidation or termination;
• blocking a decision on the redistribution of profits.

When an offshore company is not a legal entity, control is determined by the following statuses:

• in a partnership – the status of a participant (with a sufficiently controlling share);
• in a fund – the status of the property owner (or a significant portion of it);
• in a trust – the status of the settlor.

Please note! Controller status can be confirmed by documents such as a trust declaration, a general power of attorney, a nominal service agreement, etc.

Experience in submitting CFC reports from previous years shows that it is important to correctly determine the type of control over a foreign company. Incorrect determination of the type of control is error No. 1 (according to the tax authority).

“Formal-legal control” refers to direct or indirect ownership of a share in a CFC, which is legally formalized.

“Actual control” over an offshore company includes:

• giving instructions to the company’s management bodies;
• concluding transactions/agreeing on the essential terms of such transactions, which are later formally approved by the management bodies;
• having a power of attorney to carry out substantial transactions for a period of more than one year;
• conducting operations through the company’s bank accounts;
• designating a person as the settlor when the company opens accounts in the bank.

Please note! The issue of actual control arises when dealing with a complex ownership structure (in particular, a holding). The burden of proving the presence of actual control lies with the State Fiscal Service (SFS).

What Obligations Are Imposed on the CFC Controller?

The purpose of CFC reporting is to prevent the leakage of financial profits from our country to offshore zones, primarily to low-tax jurisdictions. Accordingly, Ukrainian residents are obligated to disclose their ownership or control over foreign companies and subsequently pay taxes on undistributed profits.

Important! The high-profile Law No. 466-IX was adopted as part of the global trend towards “de-offshorization.” It involves joining the Common Reporting Standard (CRS) for automatic exchange of tax information and aligning legislation with the anti-BEPS plan and FATCA laws. Further tightening of the “rules of the game” for both Ukrainian and international businesses will follow, and preparations should be made for this.

Controlling persons must:

1. Notify tax authorities about foreign assets.
2. Submit an annual special CFC report.
3. Provide financial statements for the offshore company, formatted according to IFRS standards.
4. Pay taxes in Ukraine on the undistributed profits of each CFC.
5. Notify the State Fiscal Service (SFS) within the statutory deadlines about liquidation or changes in the ownership structure of the CFC.

***Note: The tax authority must be notified both about the purchase and sale of corporate rights and about the acquisition or termination of actual control over the CFC.

Please note! After the martial law is lifted, the tax authority will likely use the CRS automatic exchange of tax information tool as part of Ukraine’s accession to the MCAA (Multilateral Competent Authority Agreement).

If the obligations of the controlling person are unacceptable for the Ukrainian beneficiary, there are options to change the legal status of the company or the owner.

Possible options to optimize the tax burden when owning an offshore:

• change the jurisdiction of the company’s registration: select a country that meets the criteria for tax exemption;
• change the tax residency of the legal entity to Ukraine;
• combine operational and holding activities to meet the conditions for tax exemption.

This list cannot be considered exhaustive. There are no standard algorithms that suit everyone to solve such tasks. Experts from Lawrange are ready to analyze your business’s specifics and develop an individual solution.

CFC Taxation Regulations

The CFC law clearly states: the taxpayer of a non-resident business entity is the controller. The taxable object is the portion (percentage) of the adjusted profits of the entity in proportion to the share held by the taxpayer at the end of the specific reporting period.

Adjusted profit refers to the income of the organization in the jurisdiction of registration before tax (EBITDA) according to the unconsolidated financial statements for the year. The procedure for calculating the adjusted profit, subject to taxes/fees in Ukraine, is regulated by legal acts. The organization’s profit is adjusted by subtracting certain incomes to avoid double taxation and adding them using transfer pricing methods (referred to as tax differences). Offshore profit in foreign currency should be converted into Ukrainian hryvnias at the National Bank’s exchange rate on the date of submitting the CFC report.

Please note! Even if the legislation of a particular jurisdiction does not require the preparation or submission of financial statements to government bodies, the taxpayer in Ukraine should ensure the preparation of such documentation for the non-resident entity according to international financial reporting standards (IFRS).

The tax rates on CFC profits in Ukraine are as follows:

• for legal entities – 18%;
• for individuals, when the profit is undistributed (dividends are not paid) – 18% + military tax*;
• for individuals, when dividends are received from abroad from an offshore company before submitting the report – 9% + military tax.

*Note: The military tax is 1.5% until December 1, 2024, and 5% thereafter.

The tax calculation formula is as follows: (EBITDA +/- tax differences) * controlling person’s share * tax rate.

Conditions for Tax Exemption

Under certain circumstances, entities that fall under the definition of CFC (Controlled Foreign Corporation) are exempt from the obligation to pay tax in the Ukrainian tax jurisdiction. Such an opportunity can be used if:

• the total annual income of the controller from all CFCs does not exceed 2,000,000 EUR;
• the company does not engage in commercial activities, in particular, it is involved in charity work and does not distribute income to beneficiaries;
• the company is publicly traded, and its shares are listed on a reputable stock exchange;
• there is an agreement between our country and the state of the offshore registration, such as one of the following (or both): a DTT (Double Taxation Treaty) or an agreement on the exchange of tax information;
• in the jurisdiction of registration, the business entity pays corporate tax of 18% or more (as in Ukraine or higher);
• in the state of registration, a tax of at least 13% is paid (the difference with Ukraine is no more than 5%);
• in the total profit of the company from all sources, passive income constitutes less than half.

Recommendations from Lawrange for Preparing CFC Reporting

We recommend that entities meeting the criteria for controlling persons consult with us for legal advice and then develop an action plan for optimizing the tax burden, if necessary.

Important! During the consultation with the Lawrange specialist, you will get answers to the following questions:

• Do you meet the definition and criteria of a controller?
• Can you take advantage of the tax exemption opportunity?
• What amount of adjusted profits is subject to taxes and fees in Ukraine?
• Is there an urgent need to implement action plans to reduce the tax burden?
• What tax optimization options can be applied according to the situation?
• What actions and deadlines must be followed to comply with the CFC legislation?
• How can you avoid sanctions from tax authorities?

Deadlines and Features of Report Submission

• The first reporting year for the CFC report is 2022.
• In 2025, reports for 2023 – 2025 can be submitted at once.
• Such a special report should be submitted to the State Fiscal Service (SFS) simultaneously with one of the following declarations:

— Regarding property status and income – by May 1 (the calculated tax must be paid by August 1);

— Regarding corporate income tax – by March 1 (CFC report in 2026 – by March 3, since March 1 falls on a Saturday).

• The declaration must include the adjusted profit of the offshore entity.
• The report on the profit/loss of the offshore company covers a specific calendar year.
• A special report should be submitted even if:
  — The offshore is in a “dormant” state (no business activity is conducted);

— There are grounds for tax exemption;

— The profit shows a negative value.

• The document is sent to the SFS in digital form via online communication (in accordance with the electronic document management law and using a qualified digital signature).
• A copy of the financial statements of the business entity, confirming the profit or loss, must be attached to the special report.
• Controllers, since January 1, 2022, must send notifications to the SFS regarding the acquisition (purchase of corporate rights) or cessation of participation in the offshore entity.

Requirements for the Content of the Special Report

The special report for the offshore entity to the SFS should include the following information:

1. Name, legal address, organizational form, registration number, tax identification number of the business entity.
2. Ownership and management structure, including the indirect ownership scheme.
3. The size of the controller’s share in the authorized capital.
4. The amount of profit before tax, according to financial statements – revenue from product sales, work performed, services rendered, operating activities.
5. Calculations of adjusted profit.
6. Dividends received from Ukrainian business entities, if applicable.
7. Income from the business structure’s representation in our country, if any.
8. The amount of profit actually transferred to the controller.
9. Transactions with non-resident counterparties from jurisdictions listed as offshore zones.
10. The number of employees of the enterprise at the end of the tax year.
11. Justifications for tax exemption, if applicable.

Important! The special report for the offshore entity must be accompanied by copies of the financial statements of the organization with proper certification, confirming the income for the reporting year.

In addition, upon request from the SFS, the following must be submitted:

• explanations regarding the CFC;
• documentation for controlled transactions;
• an independent and authoritative audit report, in case the SFS representatives have doubts about the truthfulness and accuracy of the financial statements.

The SFS has the right to send a request for additional explanations when:

• the Ukrainian tax resident is the controller and has not submitted the special CFC report;
• the information in the special report does not reflect the actual situation, contains significant inaccuracies, or errors.

Explanations must be prepared and submitted within two months of receiving the request. The response to the SFS request should include explanations and arguments on the facts mentioned in the request, supported by certified copies of the documentation.

The audit report must be provided by an audit organization with the appropriate license to audit financial statements in the specific foreign jurisdiction. Submission of a negative audit report or refusal to issue an audit report is not allowed.

Special Report in Simplified Form

In some exceptional cases, the legislation allows the submission of a special report to the State Fiscal Service (SFS) in a simplified form. The justifications for this are as follows:

1. the entity does not have the capacity to prepare financial statements;
2. the entity is unable to make correct calculations regarding adjusted profit by the deadline for submitting the property status and income declaration or the corporate income tax declaration.

This often refers to situations where, at the deadline for submitting CFC reports in Ukraine (March 1 or May 1), the foreign company has not yet submitted its tax declaration and financial statements in its country of registration, if required.

The special report in the simplified form includes only the information specified in items 1–3 of the content requirements for such a document (see above). If a report is submitted in this simplified form, a full report must be submitted by the end of the calendar year.

Tax Control and Liability for Violations

According to the provisions of the Law of Ukraine No. 4113-IX dated December 4, 2024, which came into effect on December 26, 2024, no penalties will be imposed on taxpayers for violations related to CFCs during the period from January 1, 2022, and during martial law, as well as for six months after the termination or cancellation of martial law.

However, it is important not to relax, as during this time, the relevant special reports will still need to be submitted to the SFS. In the future, failure to submit a special CFC report, and consequently, the absence of adjusted profit data in the annual tax declaration, will lead to audits and the imposition of substantial fines.

Please note! Even without automatic exchange of tax information, Ukrainian tax authorities can exchange information upon request (Exchange of Information on Request, EOIR). The feature of such information exchange is the possibility of receiving virtually any significant data for taxation purposes (except for those whose provision contradicts national legislation and public order). At the same time, the automatic exchange under the CRS standard provides a strictly limited format of information – the transmission of data about foreign financial accounts.

Additionally, the introduction of open beneficiary registers in many countries facilitates the detection of Ukrainian owners of offshore companies.

Fines Related to Offshore Tax Offenses

Serious penalties will be applied for violations in this area:

• Failure to submit the special report – 100 times the minimum wage for a working individual (MWI), approximately linked to January 1, 2026 – 302,800 UAH;
• Late submission – 1 MWI for each subsequent day of delay, but a maximum of 50 MWI, 3,028 UAH per day, meaning up to 151,400 UAH;
• Failure to report all non-resident entities owned by the controller, or incomplete reporting – 3% of income/25% of adjusted profit, but a maximum of 1,000 MWI for each individual case or for unreported amounts in total, 3,028,000 UAH;
• Failure to notify about acquiring a share (part, percentage in the authorized capital, corporate rights) in an offshore entity, taking actual control, transferring (selling, re-registering) the share, or losing control within the prescribed legal timeframes – 300 MWI for each such case, 908,400 UAH;
• Failure to submit or incomplete submission of documents regarding transfer pricing (TP) or other requested documents – 3% of the income for which the documents were not submitted, but a maximum of 1,000 MWI;
• Failure to submit the special report within 30 days after the last day of the penalty payment deadline – 5 MWI for each day of delay, but a maximum of 300 MWI.

***Note: Payment of a fine does not justify the elimination of the taxpayer’s obligation to submit the special report and supporting documents.

Minimizing Risks for the Controller

Ukrainian beneficiaries of offshore companies need to adapt to new rules. Although penalties will not apply during the martial law period, this should be used to its maximum benefit. At the very least, a decision must be made: to show the offshore in documents for the tax authorities or to find a way to avoid the status of a CFC controller.

Important! It is futile to hope that “forgotten” or “left behind” non-resident companies will be out of the risk zone. You will have to report on them, or penalties will follow. The issue of owning an offshore company can only be closed by liquidating the company. However, a company that is automatically removed from the Registry (through the striking-off procedure) is not considered liquidated.

In some cases, changing residency status can be an acceptable option for the controller. Specifically, jurisdictions with no CFC reporting requirements for individuals, a reasonable level of tax burden for individuals, and an acceptable residency period to obtain resident status are considered. Among the most effective jurisdictions for tax migration are Portugal, Andorra, Gibraltar, Switzerland, Bulgaria, Montenegro, and others.

The question of avoiding the status of a controller by “diluting” shares, applying the presumption of 100% ownership, or whether schemes involving the establishment of discretionary trusts, umbrella investment funds, etc., will be effective, remains a topic of discussion.

Preparation of CFC Reporting in 2026

The process of preparing CFC reports includes not only filling out the full or simplified form. It also involves other mandatory steps:

1. Timely submission of the property and income declaration. This must then be submitted to the controlling authorities together with the CFC report. For legal entities, an alternative document will be the corporate income tax declaration.
2. Passing an audit and submitting the results. This is not mandatory, but the CFC will have to undergo an audit if the tax authorities have doubts about the credibility of the submitted reporting.
3. Preparing a transfer pricing report. This report must be provided to the tax authorities upon request.

CFC reporting for 2025 is a document package whose preparation is a labor-intensive process, and it’s easy to make a mistake without experience. Therefore, to avoid problems with the tax authorities, it is recommended to seek professional help.

Why Choose Lawrange

Lawrange is a team of professionals with significant experience in supporting offshore companies.

When it comes to submitting CFC reporting, we guarantee:

• Comprehensive support at all stages of preparation and submission of CFC reports. By contacting us, you can rely on receiving a full range of services. We will also help with non-standard situations, such as passing audits or submitting additional documents upon request.
• Full confidentiality. You can be confident that all information regarding your business operations will remain strictly confidential and will not be shared with third parties.
• Personalized services. We understand that each foreign enterprise is unique, so we base our activities on an individual approach to each client.
• Effective resolution of disputed issues. Lawrange professionals have vast experience in resolving problematic situations. We ensure the prompt and timely submission of reports, regardless of the circumstances.

Our experience and knowledge in international and corporate law will help you avoid issues with controlling authorities and unnecessary costs associated with paying penalties.

Conclusion

Submitting CFC reports in 2025 is still not a completely familiar procedure for Ukrainian entrepreneurs. The legislation in this area is in the process of development and regularly undergoes changes that need to be tracked and strictly adhered to.

Professional lawyers at Lawrange are ready to take on all the complexities of the process. Secure the help of a reliable legal partner and focus all your efforts on achieving global business goals!

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