Controlled foreign companies: Results of submitting a notification

Since the beginning of 2022, the State Tax Service has received 2710 Notifications on the acquisition of ownership, registration and sale/liquidation of the controlled foreign company or formation without the legal entity’s status (funds, trusts) (hereinafter – Notifications), of which 2602 are from individuals-residents of Ukraine and 108 – from legal entities-residents of Ukraine.  

The main countries in which individual (legal entity) – resident of Ukraine acquired/alienated shares in the foreign legal entity, property rights to a share in assets, income or profit of entity without the legal entity’s status are the Republic of Poland – 591, United States of America – 339, Republic of Cyprus – 330, Great Britain – 312, Republic of Estonia – 229, other countries – 909.

In addition, to fulfill requirements of Sub-paragraph 39².6.3 Paragraph 39².6 Article 39² of the Tax Code of Ukraine (hereinafter - Code), banks/financial institutions and other controlling bodies sent 5626 Notifications about facts that indicate ownership of a share in the foreign legal entity by individual-resident of Ukraine.

At the same time, please note that Sub-paragraph 39².5.5 Paragraph 39².5 Article 39² of the Code defines the need to submit notification to the controlling body:

about each direct or indirect acquisition of a share in the foreign legal entity or beginning of actual control over the foreign legal entity, which leads to the recognition of such individual (legal entity) as a controlling entity, respectively;

establishment, creation or acquisition of property rights to a share in assets, income or profit of entity without the legal entity’s status;

each alienation of a share in the foreign legal entity or termination of actual control over the foreign legal entity, which leads to the loss of recognition of such individual (legal entity) as a controlling entity;

liquidation or alienation of property rights to a share in assets, income or profit of entity without the legal entity’s status.

It is also worth remembering that if the controlling individual does not notify controlling body about the acquisition of a share in the foreign legal entity, formation without the legal entity’s status, or about beginning of actual control over the foreign legal entity, or about alienation of a share in the foreign legal entity, or on termination of actual control over the foreign legal entity within terms stipulated in Sub-paragraph 39².5.5  Paragraph 39².5 Article 39² of the Code, there is imposition of a fine in the amount of 300 amounts of the subsistence minimum for an able-bodied person, established by the law on January 1 of the tax (reporting) year for each such fact (Paragraph 120.7 Article 120 of the Code).

Amount of the fine is 805 200 UAH as of January 1, 2023.