CFC or not CFC: that is the question

The Client applied to Interlegal for legal advice upon legal effects due to entry into force of the draft law No. 1210 “On amendments to the Tax Code of Ukraine regarding improvement of tax administration, elimination of technical and logical inconsistencies in tax legislation”, also known as the Draft Law on CFCs (controlled foreign companies).

 

Interlegal lawyers explained several nuances concerning entry into force of the draft law, in particular:

1) foreign company declaration procedure

2) the Ukrainian resident’s responsibility for concealing information about controlled resident structures

3) procedure for taxation on non-resident company’s income in Ukraine and applicable tax rates.

 

As for the draft law current status, Interlegal lawyers noted that today there is non-standard situation: formally it can be treated as adopted, while without the fact of its announcement (publication) the law cannot be treated as entered into force.

In the end, Interlegal lawyers also modeled the possible scenarios regarding the draft law.

 

In addition, Interlegal experts studied the Client’s working scheme and highlighted the risks related to recognition of the non-resident company as permanent representative office in Ukraine, since the company management is located in Ukraine.

 

With regards to further changes in law regulation on controlled non-resident companies, Interlegal experts granted recommendations to the Client upon changing its working scheme, including business relocation in another jurisdiction.

 

Interlegal law team – Irina Voyevodina, Daria Liashenko and Marta Sverdlykivska – led the project.