Earlier in our post dated December 23, 2020, we informed about new amendments in the legislation of Ukraine, introducing the institution of controlled foreign companies (CFC) into legal circulation. You can view it here.
The new Law of Ukraine No. 4065 of December 17, 2020, which entered into force on January 1, 2021, postponed the date of entry into force of the provisions of the Tax Code of Ukraine regarding CFCs by one year.
For Ukrainian residents - owners of shares in a CFC, incl. registered in Poland, it means that:
1. The first period for which it will be necessary to submit a report on the CFC will be 2022. At the same time, controlling persons have the right to submit a report for 2022 at the same time as filing an annual return for 2023, combining data on the adjusted profit of the CFC for 2022 and 2023. Thus, the obligation to file CFC reports will arise, at will of the controlling person, only in 2024.
2. The rules regarding the specifics of calculating the adjusted profit of a CFC come into force from 1 January 2023.
3. Criminal and administrative liability in relation to a taxpayer and its officials for violations of the provisions of the Tax Code of Ukraine on CFCs will be applied only based on the results of reports for 2022 and 2023.
4. The following are also excluded from the total monthly (annual) taxable profit of the taxpayer:
- dividends that were previously taxed at the level of a Ukrainian company,
- income in cash and / or other property form, which were made as a contribution to the capital of a foreign legal entity,
- income in cash and / or other property form received by a taxpayer - a shareholder of a foreign legal entity upon liquidation (suspension) of a foreign legal entity, provided that all of the following conditions are met simultaneously:
- the procedure of liquidation (suspension) of a foreign legal entity began no earlier than January 1, 2020 and completed no later than December 31, 2021,
- the taxpayer submitted to the supervisory authority, simultaneously with the tax return, an application in any form for the exemption of such income from taxation, indicating the characteristics of the property received and the data of the liquidated (suspended) foreign legal entity, as well as documents containing information regarding the value of the property received, in accordance with the financial statement of a foreign legal entity, as of the date of the decision on the division of property in the form of income payments in connection with the liquidation (suspension) of a foreign legal entity,
- a foreign legal entity was registered on the basis of a transaction or the law of a foreign state (territory) no later than May 23, 2020.