Is a resident of Ukraine who has registered an individual entrepreneurship in a foreign country a controlling person within the meaning of Article 39-2 of the TCU?
In accordance with subpara. 1.1 of the TCU, a controlled foreign company (hereinafter - CFC) is any legal entity registered in a foreign state or territory that is recognized as being under the control of an individual resident of Ukraine or a legal entity resident of Ukraine in accordance with the rules established by the TCU.
A legal entity may be recognized as a corporate entity (association) or an organization with the right to own assets, have rights and obligations, and carry out activities on its own behalf and independently of its founders, participants or form of ownership. The status of a legal entity of a controlled foreign company shall be recognized in accordance with the law of its registration.
Subject to the provisions of this Article, a controlling person is a natural person or legal entity - residents of Ukraine who are direct or indirect owners (controllers) of a controlled foreign company.
A foreign company shall be recognized as a controlled foreign company if an individual resident of Ukraine or a legal entity resident of Ukraine (hereinafter referred to as the controlling person)
a) owns a share in a foreign legal entity in the amount of more than 50%, or
b) owns a share in a foreign legal entity in the amount of more than 10%, provided that several individuals - residents of Ukraine and/or legal entities - residents of Ukraine own shares in a foreign legal entity, the amount of which in aggregate is 50% or more, or
c) individually or together with other residents of Ukraine - related parties exercises actual control over a foreign legal entity.
At the same time, subpara. 39-2.1.3 of the TCU defines a share in a foreign legal entity as corporate rights, rights in an entity without the status of a legal entity, the assets of which include a share in a legal entity, or any other similar rights and/or powers that give an individual or legal entity the right to
a) to influence the corresponding share of votes in the supreme management body of a foreign legal entity (general meeting of shareholders, participants or other similar body), and/or
b) obtaining the relevant part of the foreign legal entity's profit, and/or
c) blocking the decision on the distribution of a part of the foreign legal entity's profit, and/or
d) to receive the relevant part of the assets of a foreign legal entity in the event of its liquidation or termination.
In view of the above, a sole proprietorship cannot be a controlled foreign company within the meaning of Article 39-2 of the TCU.
Buhgalter 911 notes that the content of the author's materials may not coincide with the policy and opinion of the editorial team. The authors of the published materials include not only representatives of the editorial team.
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