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16.01.2020 The Law on Amendments to the Tax Code of Ukraine on improvement of tax administration, elimination of technical and logical inconsistencies in the tax legislation, which in particular introduces the concept of taxation of the CFC was adopted.

 Concerning the definition of CFC – its  a legal entity or entity without legal registration (partnership) OUTSIDE OF UKRAINE in which a resident of Ukraine owns shares of more than 50 percent, or owns  shares of more than 10 percent, provided that several individuals - residents of Ukraine and / or legal entities -  resident of Ukraine own 50 percent shares in a foreign legal entity  or more. In this case, a “share in a foreign legal entity” means corporate rights or any other similar rights and / or power make decisions. The same applies to persons who have the authority to manage an bank  account  and are known/fixed   as beneficiaries when opened sucha bank account.

 

The taxation of undistributed profit of CFCs at the level of Ukraine-resident owner (natural or legal person will be 18% (and in special cases  5% / 9%).

But also there are tax exemptions if:

A) between Ukraine and the foreign jurisdiction of the location (registration) of the CFC  there is a valid double tax and

any of the following conditions is valid:

- CFC actually pays income tax at an effective rate that is not less than 13% (so. Cyprus-based companies are not anymore protected by the double-taxation treaty as there appears actually a 12% taxation!!)

or

-the passive income of CFC is no more than 50 percent of the total income of CFC (f.e.royalties etc).

 

B) Notwithstanding the conditions set out in A), if

the total income of CFC from all sources according to the financial statements does not exceed the equivalent of € 2 million at the end of the reporting period.

 

The controllers of CFC (owners with more than 10% of shares) will be required to submit a CFC report at the same time as the submission of an annual declaration of wealth and income or a corporate income tax return for the relevant calendar year and financial statement. If it is not possible to submit a  financial statement within the aforementioned period, -  no later than the end of the year in which the declaration is submitted.

Failure to submit a CFC report shall result   - a fine in amount  of 100 times minimum subsistence minimum for an able-bodied person for each such fact, and for a late submission - a fine of 50 times the subsistence minimum for an able-bodied person for each such fact.

Law will come into force on the next day after official publishing.

Pursuant to the Final Provisions of the law, the regulations concerning CFC shall enter into force on 01.01.2021