Controlled foreign companies (CFC) rules in Ukraine

Правила контролируемых иностранных компаний (КИК) представляют собой мощный механизм, позволяющий властям облагать налогом иностранную прибыль резидентов, а также бороться с BEPS.

В настоящей публикации рассматриваются правила КИК, в частности и особенности, внедренные Законом “О внесении изменений в Налоговый кодекс Украины относительно усовершенствования администрирования налогов, устранения технических и логических несогласованностей в налоговом законодательстве” от 16.01.2020, который широко обсуждается в экспертном сообществе.

Controlled foreign companies (CFC) rules in Ukraine

The controlled foreign companies (“CFC”) rules are a powerful mechanism allowing authorities to tax the foreign profits of residents. Ukrainian CFC rules were first set towards the end of 2017 as a response to OECD`s BEPS Action Plan. On May 23 2020, CFC rules were officially adopted in the Anti-BEPS Law, known and described in our previous article as the Tax Bill 1210. The above-mentioned amendments will affect Ukrainian beneficiaries post January 1st, 2021.

Controlled foreign companies rules introduce taxation of residents of Ukraine owning or controlling a foreign legal entity (conditions apply) with 19.5% rate. The Law is applicable to Ukrainians holding >50% of a CFC independently or >25% of a CFC with another resident of Ukraine who owns >50% or controls the CFC. The combination of CFC rules and Common Reporting Standards (CRS), introduced in over 135 countries, will allow authorities to tax foreign sourced income and encourage tax transparency. Overall, such changes will prove to be a turning point for holding companies in low tax jurisdictions with Ukrainian beneficiaries.

Despite severe limitations, Eurofast has solutions and know- how to support and restructure your business so as to meet the new CFC rules and standards. According to the Anti-BEPS Law, the CFC income will be deemed out of the scope of the tax authorities if:

Total annual income of a CFC is less than EUR 2 million;
There is a suitable Double Tax Treaty agreement in place with the CFC’s country and:
The CFC pays corporate income tax of more than 13% or
The passive income form of a CFC is less than 50%
The CFC is a public company traded on a stock exchange;
The CFC is a charitable organization.

Автор: Eurofast


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