Analysis of the impact of CFC (Controlled Foreign Company) rules for residents of Ukraine in the context of British companies

Analysis of the impact of CFC (Controlled Foreign Company) rules for residents of Ukraine in the context of British companies

Opening a company in the United Kingdom is an effective tool for international business, but Ukrainian residents must take into account CFC (controlled foreign company) rules. Since 2022, Ukraine has had mandatory reporting requirements for foreign companies controlled by resident individuals.
Consultant Law Firm helps you understand whether your structure falls under CFC rules, what the consequences are, what taxes need to be calculated in Ukraine, how to minimise risks and avoid penalties for reporting violations.

What is a CFC and why does it apply to British companies?

A controlled foreign company (CFC) is a legal entity registered outside Ukraine that is directly or indirectly controlled by a resident of Ukraine. A typical example: a Ukrainian citizen opens an LTD in the UK, is its director or shareholder, and makes key decisions independently.
In this case, such a company is recognised as a CFC, and therefore:

1. It will be necessary to declare the CFC to the Ukrainian tax service.
2. 
   Calculate and, possibly, pay tax on the profits of this company in Ukraine.
3. 
   Submit reports within the deadlines established by the Tax Code of Ukraine.

Failure to do so will result in fines of up to UAH 1 million or more, as well as the risk of blocked banking transactions and increased scrutiny of income sources.

CFC analysis services: what is included?

Before opening a company in the United Kingdom or after its creation, it is important to check whether you are required to declare it as a CFC in Ukraine.
Our specialists conduct a detailed analysis of your structure, residency, sources of income and other factors to determine:

• Whether the company falls under CFC.
• 
  Whether it is possible to avoid CFC status or transfer control to other structures.
• 
  Whether you will have to pay tax in Ukraine and how to calculate it correctly.
• 
  When and what reports to submit in order not to violate the deadlines.
• 
  What penalties are possible for late or incorrect filing of the declaration.
• 
  What documents and forms need to be prepared (reports, certificates, financial statements, non-resident status certificate, if necessary).

We also provide ready-made templates for tax authorities, instructions for accountants, and check agreements between the owner and the company for tax risks.

Documents for CFC reporting in Ukraine

In order to declare a controlled foreign company and avoid sanctions from the Ukrainian tax authorities, it is important to prepare a complete set of documents in advance. It may vary depending on the form of the company, the amount of profit, the presence of activity, but the basic list is almost constant:

• The company's financial statements for the reporting period (in accordance with UK GAAP or IFRS standards).
• 
  Ownership structure (including direct/indirect participants, shares, control).
• 
  Explanation of sources of income and main activities.
• 
  CFC tax return (as an appendix to the general personal income tax return in Ukraine).
• 
  Confirmation of non-resident status (certificate from HMRC or a bank).
• 
  Certificate of taxes paid in the UK — to avoid double taxation.

Preparing documents takes time, so we recommend not waiting until the end of the year, but contacting us before submitting your tax return.

Why you should work with Consultant law firm?

In-depth understanding of CFCs on both sides. We are familiar with both Ukrainian tax legislation and the rules governing the operation of British companies (LTD, LLP, holding companies).

A practical approach to calculations and risks. We provide not only theory, but also help to prepare reports, calculate taxes and collect confirmation from HMRC.

Confidentiality and data security. We work without transferring documents to third parties. All information is protected and processed in accordance with international standards.

Frequently asked questions about CFC analysis