Tax and accounting insights for Ukraine
13.05.24
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Fines for failure to submit CFC reports have been postponed: is it good?

MP Nina Yuzhanina recalled that Ukrainians have been setting up companies not only in Ukraine but also abroad for many years. This process continues to this day. And this is normal.

At the same time, in 2020, amendments to the Tax Code were adopted stating that the owners of such companies must file reports in Ukraine on the income they received "there", pay taxes "there" and pay tax in Ukraine on those incomes that are not taxed in the country of registration of such a company.

It is logical and extremely necessary for our country, especially now.

So, fines for failure to submit reports on such companies (controlled foreign companies - CFCs) have been canceled until the end of martial law + 6 months (amendment 147 in the adopted draft law 10168-2).

This means that starting from January 1, 2022, CFC owners will be exempt from fines for failure to submit, late submission of CFC reports or failure to provide full information on CFC income subject to taxation in Ukraine.

"I am absolutely not against the exemption from fines/deferral of fines during martial law in the country (indeed, there may be different circumstances), but why not provide a similar provision for Ukrainian VAT payers?!" asks MP Nina Yuzhanina.

In 2022 and 2023, according to the State Tax Service, fines for late registration of tax invoices amounted to almost UAH 14 billion, including UAH 8.2 billion in 2023 alone.

"Please tell me, where is the justice here?

Why do theauthorities have such empathy for the owners of foreign companies and disregard for taxpayers who are barely staying afloat but continue to work in Ukraine?" the MP writes.

In September 2024, Ukraine may receive information on financial accounts for the first time within the framework of the Global Forum on Transparency and Exchange of Information for Tax Purposes.

According to N. Yuzhanina, the adoption of the amendment authored by the head of the Tax Committee will mean:

1. Creation of another corruption scheme in the tax service.

Data on the results of information exchange under the CRS Common Reporting Standard is information with limited access, so only the tax authorities will have it.

Yes, the tax authorities will not impose fines yet, but for a certain fee they can help those close to the authorities to submit adjusted CFC reports and thus avoid fines in the future.

We have already submitted the reports (deadline is 01.05) and declared tax amount of UAH 1 billion 776 million.

Therefore, even these owners will be able to avoid paying to the budget after adjusting their reports.

2. Even more equalization of taxpayers.

Exempting some taxpayers from fines and applying them to others is definitely not about creating equal opportunities, you must admit.

But, unfortunately, this is the approach that has been decisive in changing the tax rules over the past five years.

Nina Yuzhanina, MP

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