Tax obligations of the controller of a foreign company (CFC)

What is the tax rate?

The taxable object is the part of the CFC's adjusted profit proportional to the controller's shareholding.
For legal entity controllers, the tax rate is 18%.
For individual controllers:

9% PIT and 1.5% military tax if the CFC distributes profit before the controller submits the CFC report;
18% PIT and 1.5% military tax in other cases

Who is eligible for CFC tax exemption?

A controller is eligible for exemption from CFC taxation if the following conditions are met:

There is a double taxation treaty or a tax information exchange agreement between Ukraine and the country where the CFC is registered; and
One of the following conditions is met:
a) The CFC pays corporate income tax in its country of residence at an effective rate not lower than 13%;
b) The share of passive income of the CFC does not exceed 50% (this criterion also applies to companies whose income is more than 50% passive but have a sufficient level of substance). Requirements for the sufficient level of economic presence (substance) are set separately in each jurisdiction and may vary depending on the type of business activity of the company.

Additional grounds for exemption from taxation:

a) The total combined income of all CFCs of the controller from all sources, according to financial statements, does not exceed the equivalent of 2 million euros at the end of the reporting period; or
b) The CFC is a public company, and its shares (stakes) are traded on a recognized stock exchange; or
c) The CFC is a charitable organization and, according to the legislation of its country of registration, does not distribute income for the benefit of its founders (participants).

If you have questions, Avitar will help:

Analyze if CFC rules apply to you;
Determine if there are grounds for exemption of CFC profits from taxation in Ukraine;
Develop a working model to help reduce the tax burden;
Analyze the financial statements of the CFC and determine the adjusted profit subject to taxation in Ukraine;
Assist with CFC reporting;
Prepare the tax declaration regarding property and income;
Prepare the CFC report and notification.

Additional grounds for exemption from taxation:

How exactly do we help?

Avitar offers full legal support for CFC controllers, assisting with:

Determining if there are tax obligations regarding CFC profits in Ukraine;
Assessing the possibility of CFC tax exemption based on double taxation agreements or other conditions;
Developing a strategy to optimize the tax burden considering the specifics of the CFC's activities;
Analyzing the CFC's financial statements and determining the taxable portion of the profits;
Preparing CFC reporting and tax declarations regarding property and income;
Providing consultations on changing jurisdictions or financing strategies to minimize taxes.

Why choose us?

Tax Law Expertise:

Avitar has many years of experience in supporting CFC tax obligations, enabling us to provide accurate and effective solutions.

Individual Approach:

We consider the specific circumstances of each client and offer the most optimal strategies to reduce the tax burden.

Comprehensive Services:

From consultations to full preparation and submission of reports — we handle all stages of the process.

Legal Security:

We guarantee that all tax obligations will be met within the law, ensuring protection against fines and penalties.

Case Study:

Our client is a large Ukrainian company that owns several controlled foreign companies in Europe. After a detailed analysis of the CFC's financial statements, we helped them optimize their tax strategy, which allowed them to reduce their tax burden by 30%. Additionally, we identified grounds for exemption from taxation and helped submit the reports on time, without violating any legislation. As a result, the client retained a significant portion of their financial resources and avoided potential fines for tax obligation violations.

If you have questions or want to learn more about the tax obligations of CFC controllers, contact Avitar. Our experts are ready to help you optimize your tax strategy and ensure compliance with all tax requirements.

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Tax Obligations of the Controlled foreign company (CFC) Controller

When does the CFC tax arise?