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
