Controlled Foreign Company (CFC)
A CFC is a legal entity or similar structure registered outside of Ukraine and controlled by an individual or legal entity resident in Ukraine. A CFC can be any company, trust, fund, or partnership registered abroad but controlled by a Ukrainian resident.
You are considered a controlling person and are required to report on the CFC
Повідомлення Gemini Tax residency of Ukraine
A share in a foreign company of more than 50%
You are a beneficiary or control a foreign company
What are the CFC obligations
Reporting changes (CFC registration, purchase/sale of a share, termination of control, etc.); 60 days are provided for the notification from the date of the change.
Submit a CFC report for 2025 in 2026 along with the annual income tax return (by May 1).
Pay income tax (18%, 9%, or 5%) and a military tax (5%) if there are no grounds for tax exemption.
What CFC controllers should pay attention to?
Significant fines for violations (for example, 332,800 UAH for failure to submit a report, and 998,400 UAH for failure to submit a notification for each instance).
There is no separate notification procedure for CFC controllers regarding a status change from a resident of Ukraine to a non-resident.
Uncertainty regarding notification and reporting obligations in the event of a status change (situations where a controlling resident of Ukraine submitted notifications/reports but became a resident of another country in subsequent periods).
Do you have a foreign company or are you planning an international structure?
Do not risk fines and tax risks – seek professional consultation! Our experts will help you:
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Determine if your company falls under CFC rules
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Analyze your structure and tax risks
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Provide recommendations for further actions and interaction with accountants
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Minimize legal and tax risks
Fill out the form, and our lawyers will contact you to clarify the details.
FAQ
From what point does the obligation to report on a CFC arise in Ukraine?
Do I need to report on a CFC if the company is not conducting business?
If CFC profit is exempt from taxation, what happens to the taxable object?
In what cases is CFC profit not taxed in Ukraine?
What fines are provided for violations of CFC rules in 2026?
What is a Controlled Foreign Company (CFC)?
When is a company considered a CFC?
Why do CFC rules exist?
Do CFC owners have to report foreign profits?
Who is considered a controlling person of a CFC?
What types of income are typically taxed under CFC rules?
Do all foreign companies qualify as CFCs?
What risks arise from CFC rules?
Can businesses structure CFCs legally?
Why is legal advice important for CFC compliance?
From what point does the obligation to report on a CFC arise in Ukraine?
The obligation arises from the moment a resident of Ukraine acquires control over a foreign company. A notification about the CFC is submitted within 60 days, and an annual report is due by May 1 of the current year for the previous year (the report is filed along with the tax return).
Do I need to report on a CFC if the company is not conducting business?
Yes. Even if the CFC does not receive income or is "dormant," the controlling person is obliged to submit a report. The lack of activity does not exempt from reporting.
If CFC profit is exempt from taxation, what happens to the taxable object?
Object of taxation – part of the adjusted profit of the CFC (before tax), proportional to the share. In case of tax exemption, the adjusted profit is not calculated.
In what cases is CFC profit not taxed in Ukraine?
- payment of income tax at an "effective rate" from 13% – 18% and higher + a treaty is in effect; - the share of passive income is not more than 50% of the total income of the CFC + a treaty is in effect; - the income of all CFCs of one controlling person does not exceed the equivalent of 2 million euros; - the CFC is a public company; - the CFC carries out charitable activities.
What fines are provided for violations of CFC rules in 2026?
Fines are defined in paragraph 120.7 of Article 120 of the Tax Code of Ukraine. The amount of fines changes annually as it depends on the size of the subsistence minimum for an able-bodied person established as of January 1 of the tax year.
What is a Controlled Foreign Company (CFC)?
A Controlled Foreign Company (CFC) is a foreign corporation that is controlled by tax residents of another country. If certain ownership thresholds are met, part of the company’s profits may be taxed in the country where the owners reside.
When is a company considered a CFC?
A foreign company is usually considered a CFC when residents of a particular country: 1) own more than 50% of the company, or 2) own a significant share and collectively control the company.
Why do CFC rules exist?
CFC rules are designed to prevent companies from shifting profits to low-tax jurisdictions or offshore entities in order to avoid taxation.
Do CFC owners have to report foreign profits?
Yes. In many countries, shareholders of a CFC must report certain profits of the foreign company even if those profits have not been distributed as dividends.
Who is considered a controlling person of a CFC?
A controlling person may be an individual or company that holds a significant ownership interest or exercises effective control over the foreign entity.
What types of income are typically taxed under CFC rules?
CFC rules often apply to passive income such as dividends, interest, royalties, rental income and certain investment earnings.
Do all foreign companies qualify as CFCs?
No. In many jurisdictions, exemptions apply if the company conducts substantial business activities or pays a comparable level of tax in its country of residence.
What risks arise from CFC rules?
Failure to comply with CFC rules may result in tax penalties, additional tax liabilities and regulatory investigations.
Can businesses structure CFCs legally?
Yes. With proper international tax planning, companies can structure their foreign operations to comply with CFC rules while maintaining efficient tax structures.
Why is legal advice important for CFC compliance?
Legal and tax advisors help businesses determine whether a foreign entity qualifies as a CFC, prepare compliance documentation and optimize international corporate structures.
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