The Verkhovna Rada adopted in the first reading draft law No. 8137 aimed at improving the procedures for the administration of taxation of controlled foreign companies (CFCs). The explanatory note to the bill states that it aims to make the administrative procedures for disclosure of information about controlled foreign companies simpler and more sophisticated, which will ultimately ensure a better balance between public and private interests. What is interesting?
Notification of KIK
Fines for failure to submit CIC notifications for the period from January 1, 2022 to the date of entry into force of the draft law shall not be applied. The fine for failure to submit a notice of CIC was reduced from 300 to 50 minimums (from 802 to 134 thousand).
Please note that a fine has been introduced for late submission of the notification. For each day of delay, you will have to pay 1 minimum (2,684 UAH in 2023), but the maximum fine is no more than 25 minimums.
That is, if the notification is overdue by 100 days, the fine will be a maximum of 25 minimum – UAH 67,100.
The acquisition of ownership and/or control over KIK must be reported within 60 calendar days. Previously, there was no indication of the deadline in calendar days.
The end of the year is an important date
Now, a CIC is controlled if a resident of Ukraine (individual or legal entity) controls 50+% independently, or 10+%, but collectively together with other Ukrainians – 50+% as of December 31 of the reporting year. If you left the CIC before the end of the year, you do not have to report on this CIC. But these changes need to be reported.
Reporting deadlines have been extended
Now it is necessary to submit a report on KIK for the following calendar year. Therefore, the 2023 report will need to be submitted in 2025. Not all jurisdictions have a calendar year and obtaining certificates and/or audit reports is a long process, so this is quite an important decision.
Changing the terms of recognition of the actual controller
If you have a power of attorney for the right to dispose of property worth 10+% for a period of more than six months, you become a controller for KIK.
Checks
The tax office can conduct an unscheduled documentary check of an individual or business in the event of information about non-declaration of CIC. Such information can be obtained from the CRS or upon request. If a Ukrainian resident owns (manages) a CIC account and has not filed a report in Ukraine, he will likely be subject to an inspection.
Important
The terms for submitting documents during verification have been increased from 30 to 60 days, and documents written in English do not require translation. After reporting on the CIC and if there are grounds, the tax office can send a request with the requirement to provide explanations and documents, and the CIC controller must provide a response with copies of the documents within two months. However, if an audit report is provided together with the CIC report, there is no obligation to provide copies of the documents. Previously, there were no conditions for refusing to provide primary documents.