Tax Obligations of the Controlled foreign company (CFC) Controller

The object of taxation is the part of the adjusted profit of the CFC proportional to the share owned by the controlling person.

For legal entities-controllers, the rate is 18%.

For physical persons - controllers:

• 9% personal income tax and 1.5% VAT if the CFC distributes profits before the controlling person submits a report on the CFC;
• 18% personal income tax and 1.5% personal income tax in other cases.

The controller has the right to be exempted from CFC taxation if the following conditions are met:

• An agreement on the avoidance of double taxation or on the exchange of tax information has been concluded between Ukraine and the country in which the CFC is registered, and
• Any of the following two conditions are met:
  a) CFC pays income tax in the country of its residence at an effective rate not lower than 13%;
  b) the share of passive income of the CFC does not exceed 50% (this criterion is also met for companies whose income is passive for more than 50%, but which have a sufficient level of substance). Requirements for a sufficient level of economic presence (substance) are established separately in each jurisdiction and may differ depending on the type of activity of the company.

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) CFC is a public company whose shares (parts) are traded on a recognized stock exchange; or

c) CFC is a charitable organization and, in accordance with the legislation of the country of its registration, does not distribute income in favor of its founders (participants).

If you have any questions, Avitar will help:

• Analyze whether the rules of the CFC apply to you;
• Determine whether there are grounds for exempting the income of the CFC from taxation in Ukraine;
• Develop a work model that will help reduce the tax burden;
• Conduct an analysis of the financial statements of the CFC and determine the adjusted profit of the CFC subject to taxation in Ukraine;
• Deal with CFC reporting;
• Prepare a tax declaration on assets and income;
• Prepare a report and notice on CFC.