CFC Reporting: What Ukrainian Tax Residents Need to Know in 2025

Reporting on Controlled Foreign Companies (CFCs) has become one of the key tax obligations for Ukrainian residents who own or control businesses abroad. The regulation has been in force for two years, and the reporting requirement is real, accompanied by substantial penalties. Below is an overview of who must file, the deadlines, and the lawful optimization options available.

Who Must File a CFC Report

A Controlled Foreign Company is any foreign legal entity or structure in which a Ukrainian tax resident holds more than 50% control, either directly or indirectly. CFC rules apply to companies with passive income (dividends, royalties, interest) taxed at below 13% or not taxed at all.

A controlling person must declare the company’s non-dividend profits at 18% PIT + 5% military levy, unless the company has sufficient substance.

Filing Deadlines

CFC reports must be filed annually together with the personal income and asset declaration — no later than May 1 of the year following the reporting period.

This means that for the 2025 reporting year, the CFC report must be filed by May 1, 2026.

If an individual becomes a controlling person during the year, they must file a notification of participation in a CFC within 60 days from acquiring such status. Martial law may adjust certain procedural deadlines, but liability for late or missing filings remains in force.

Penalties for Late or Missing CFC Reports

The penalties are significant, and non-compliance may result in considerable financial losses. Key sanctions include:

• Failure to submit a report — a fine of 100 subsistence minimums (302,800 UAH).
• Late submission — 1 subsistence minimum per day of delay (3,028 UAH/day), up to 50 minimums (151,400 UAH).
• Delay exceeding 30 days — 5 subsistence minimums per day (15,140 UAH/day), up to 300 minimums (908,400 UAH).

Timely filing provides the tax authority with up-to-date information on the resident’s foreign assets, making tax oversight more efficient.

How to Legally Avoid CFC Reporting Requirements

The law allows several mechanisms to either remove a company from CFC status or eliminate the taxpayer’s status as a controlling person. The most effective options include:

• Establishing local substance: real economic presence in the country of registration (office, staff, active operations). This is one of the most reliable ways to remove a company from CFC regulation.
• Structured management: distributing actual control through trusted representatives or management staff.
• Restructuring the ownership chain: shifting to arrangements where the Ukrainian resident holds less than 50% control.
• Changing the company’s tax residency or optimizing the corporate ownership structure.

All these solutions require professional legal support and proper documentation, as tax authorities evaluate not formal schemes but the genuine economic substance behind them.