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Taras Miroshnychenko

Head of International Corporate Law and Fintech Practice

A specialist in the practice of migration and corporate law, he also specializes in legal support for business in EU countries.

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Controlled foreign company

History introduction control and taxation owners foreign companies began in 2017, when Ukraine, to fulfill the standards of the Base Erosion and Profit plan Shifting, in order to counter erosion of the tax base and tax evasion, began to develop a regulatory framework aimed at disclosure by residents of Ukraine of their participation in various foreign structures

Until now, this issue has not given a rest to our tax officials and lawmakers who changes and additions to the regulatory acts are made almost every year questioning control, reporting, and taxation of foreign companies, by the owners whose is residents of Ukraine.

In this article, we will consider what a controlled foreign company is and who it applies to control persons or carries out actual CONTROL over activity and some other nuances/

A controlled foreign company (CFC) is a legal entity registered in foreign state and is controlled by natural or legal persons – residents of Ukraine.

Controlled foreign companies are classified as classical forms of enterprises (LLC, PP, JSC, etc., or their foreign counterparts), as well as foreign entities without legal status persons (trusts, funds, etc).

Individuals or legal entities – residents of Ukraine who:

  • have a share in companies > 50%;
  • have a share in the company of> 10% (provided that other residents of Ukraine are controllers collectively own > 50% of such a company);
  • carry out actual CONTROL over by the company

It should be noted that the provision regarding the ownership of a 10% share will come into force from the 2024 year For 2022-2023 share of years possession is 25%

Under by share in KIK understand:

  • corporate rights;
  • others rights, what provides possibility influence on adoption solutions general shareholders meeting, participants;
  • right influence on distribution profits or right block their distribution;
  • right on part assets at liquidation companies.

Under actual control understand:

  • decisive influence on decision general meetings;
  • granting binding instructions in charge bodies;
  • participation in negotiations with counterparties of conclusion contracts which should be fulfilled without the approval governing body or their approval post factum
  • carrying out operations on bank accounts KIK;
  • having a power of attorney from the CIC for a period of more than 1 year, which gives it the right to conclude significant transactions regarding activity KIK without the approval by the governing body;
  • designation of the person as the founder (beneficiary, actual beneficiary) of the CIC at discoveries accounts in Financial.

Indicated above position of implementation actual control not are distributed to persons performing duties in accordance with the charter (director, accountant, managers, etc) or other specialists, which act in interests companies (lawyers, auditors, trust managing insurers, etc).

It’s worth it not to forget about the duty of physical and legal persons who direct or indirectly own a share or control KIK, regularly and timely report to the Fiscal Service of Ukraine, and pay taxes on the company’s profits in proportion to its own particles in KIK.

For non-submission, untimely submission, or failure to display mandatory information in the report strict penalties are provided, which may even exceed the profits received from activity KIK

At first glance, it seems that everything is simple and clear, but the CIC legislation contains many reference norms, exceptions, transitional provisions, and other interesting nuances and pitfalls, which we have not recommended neglect.

In order to not waste your time diving into slums valid legislation and to prevent the onset of negative consequences better in time turn to explanations to specialists.

Lawyers of the company “Prikhodko and Partners” will provide affordable and qualified advice on shelves all nuances related to regulation-controlled foreign companies, taxation, and reporting, will conduct a thorough individual analysis of your situation and will help solve any questions

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1 question

Do you exercise actual control over the foreign company by the company?

Yes
No

2 question

Do you have a stake > 10% in a foreign company?

Yes
No

3 question

Have you filed a report on ownership of a share in a foreign company?

Yes
No
Taras Miroshnychenko
Head of International Corporate Law and Fintech Practice

A specialist in the practice of migration and corporate law, he also specializes in legal support for business in EU countries.

Contact now
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