On submitting an abbreviated CFC report

Is it necessary to submit an abbreviated CFC Report in 2024 if the reporting period of a controlled foreign company begins in May 2023 and ends in April 2024, and what is the deadline for submitting the full CFC Report?

Pursuant to sub-clause ³⁹².1.1 of the Tax Code, a controlled foreign company (hereinafter referred to as CFC) is any legal entity registered in a foreign state or territory that is recognized as being under the control of a Ukrainian individual or a Ukrainian legal entity in accordance with the rules established by the Tax Code.

Subpara. ³⁹².5.1 of the TCU stipulates that for the purposes of tax control over the taxation of CFC's profit, the reporting (tax) period is a calendar year or another reporting period of a CFC that ends within a calendar year.

Pursuant to sub-clause ³⁹².5.2 of the TCU, controlling persons are obliged to submit the Report to the controlling authority simultaneously with the submission of the annual declaration of property status and income or corporate income tax return for the relevant calendar year by electronic means in electronic form in compliance with the requirements of the Laws of Ukraine "On Electronic Documents and Electronic Document Management" and "On Electronic Identification and Electronic Trust Services".

The Report must be accompanied by duly certified copies of the CFC's financial statements confirming the amount of the CFC's profit for the reporting (tax) year. If the deadlines for the preparation of financial statements in the relevant foreign jurisdiction expire later than the deadlines for filing an annual property and income tax return or corporate income tax return, such copies of the CFC's financial statements shall be submitted together with the annual property and income tax return or corporate income tax return for the next reporting (tax) period.

According to subpara. ³⁹².2.2 of the TCU, the object of taxation for personal income tax (corporate income tax) of a controlling person is a part of the adjusted profit of a CFC proportional to the share owned or controlled by such individual (legal entity) as of the last day of the relevant reporting period for which the adjusted profit of a CFC is calculated, which is calculated in accordance with the rules set forth in Art. ³⁹² of Sec. I OF THE TCU.

Subparagraph ³⁹².3.1 of the TCU stipulates that for the purposes of Art. ³⁹² of Sec. I of the TCU, the adjusted profit of a CFC is the profit of a CFC before taxation in accordance with the data of its unconsolidated financial statements prepared for the reporting calendar year (if the reporting year does not correspond to a calendar year - for periods ending in the relevant calendar year) in accordance with the accounting standards applied by the CFC and the terms for preparing such statements in the relevant foreign jurisdiction.

Subparagraph ³⁹².5.4 of the TCU provides that if the controlling person is unable to ensure the preparation of financial statements of the CFC and/or calculation of the adjusted profit of the CFC by the date of the deadline for filing the annual declaration of property and income or corporate income tax return, such controlling person shall submit a report in a shortened form containing only the information provided for in subparagraphs "a" - "c" of subparagraphs ³⁹².5.3 of the TCU.

The controlling person is obliged to submit the full Report by the end of the calendar year following the reporting (tax) year. If, in accordance with such a report, the total taxable income, the object of corporate income taxation of the controlling person increases, such person shall submit an adjusted annual declaration of property and income or a corporate income tax return by the end of the calendar year following the reporting (tax) year. In this case, no penalties and/or fines are applied.

Thus, if the reporting period of a controlled foreign company begins in May 2023 and ends in April 2024, the first reporting period for such a company will be 2024, and the controlling person is obliged to submit the report on controlled foreign companies for 2024 in 2025 together with the property and income tax return or corporate income tax return for 2024.