CFC reporting results: over UAH 2 billion in tax revenues

The State Tax Service of Ukraine has summarized the results of the campaign for submission of Reports on Controlled Foreign Companies (CFCs) for 2022-2023.

In total, 15,698 controllers submitted 39,058 Reports on 23,689 CFCs registered in different jurisdictions of the world (119 countries).

The majority of the Reports (28,509) were submitted in full form, and 10,549 were submitted in abbreviated form. Individuals filed 38,084 Reports and legal entities filed 974.

The Republic of Poland and the Republic of Cyprus remain the most popular jurisdictions for registration of CFCs by Ukrainians, accounting for 23.2% and 11%, respectively. In addition to them, the largest share among the countries of registration of CFCs is occupied by the United States of America - 9.4%, the United Kingdom - 9.1%, and the Republic of Estonia - 7.5%. Other 114 countries of registration account for about 40%.

A detailed analysis of the submitted Reports allows us to conclude that offshore jurisdictions account for the majority of CFCs' countries of registration. At the same time, there is a tendency to diversify jurisdictions, which indicates that businesses are adapting to the new tax rules.

The total amount of taxes accrued based on the declaration results exceeded UAH 2 billion. This proves the effectiveness of the new CFC taxation system and contributes to the stabilization of the state budget in the face of economic challenges.

It is worth noting that since May 2024, the amount of declared tax payable has increased by UAH 246.1 million.

The number of submitted Reports (an increase of +23% since 01.05.2024) and the declared tax (+13%) demonstrate a significant increase in taxpayers' awareness of the CFC tax accounting rules.

The introduction of the CFC reporting system helps to combat tax evasion and optimize tax liabilities. In addition, this system provides a more complete picture of international financial flows and their impact on the Ukrainian economy.

The information obtained will allow the tax service to more effectively monitor compliance with tax legislation and identify possible violations. The next step will be a detailed analysis of the submitted Reports and tax audits in case of detection of signs of violations and identification of controllers who have not fulfilled their CFC reporting obligations.

At the same time, according to the current legislation, taxpayers who independently correct errors that led to understatement of tax liabilities are exempt from penalties and fines until the end of martial law (subparagraph 69.38 of paragraph 69 of subsection 10 of Section XX "Transitional Provisions" of the Tax Code).

We remind you that in accordance with the amendments (Law of Ukraine No. 4113-IX dated 04.12.2024), the controlling person will not be subject to penalties for violations committed in the period from January 1, 2022 and during the martial law in Ukraine until the last calendar day (inclusive) of the calendar month in which the martial law will be terminated or canceled, provided that the controlling person fulfills the obligations provided for in Article ³⁹² of the TCU within six months after the termination or cancellation of martial law.

In view of the above, the State Tax Service emphasizes the need for controlling persons to comply with the CFC rules regulated by Article ³⁹² of the TCU.