Notification of KIK. To serve or not to serve?

Since the beginning of 2022, citizens of Ukraine - owners of foreign companies have become increasingly interested in what they should do with their companies, as such a concept as a controlled foreign company (CFC) appeared in our legislation.

In the information space, there are already many articles explaining this concept, so we would like to dwell in more detail on one of the responsibilities of the owner of the CIC - this is the submission of a notice of acquisition or alienation of a share in the CIC (hereinafter - the notification of the CIC).

📌 The obligation to submit a notification about the CIC appeared on January 1, 2022, and the war in the country did not cancel this obligation.

If a citizen of Ukraine acquired or alienated a share in the CIC before January 1, 2022, then there is no need to submit a notification about the CIC. If the acquisition or alienation occurred after this date, the person is obliged to submit a notification within 60 days from the date of the relevant change.

Notifications about CIC can be submitted through the electronic cabinet on the portal of the State Tax Service of Ukraine. For this, you need to have an electronic signature and up to half an hour of time. By the way, getting an electronic signature currently does not require much effort either.

The legislator also provided for liability for failure to submit a notification within the prescribed period. Therefore, such a violation is punishable by a fine in the amount of 805,200 hryvnias.

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Consequences of submission

Filing a CIC notice does not mean that the tax office will immediately charge the owner a huge tax and force him to pay it annually. It works a little differently. Yes, there really is a tax and it amounts to 18% from the part of the profit of the CIC, which is equal to the size of the owner's share in the CIC. At the same time, there is a fairly wide list of reasons for which the owner of the KIK is exempted from paying tax.

📌 For example, if the total income of the CIC at the end of the reporting year does not exceed the equivalent of 2 million euros, then the owner does not pay tax on such CIC.

And how will they know?

Many CIC owners have a logical question - how does the tax office find out about the existence of a CIC? The answer is quite simple. Ukraine actively joins the agreements on the automatic exchange of tax information, accordingly, information about the beneficial owners of European companies may become available to tax authorities in the near future.

Considering that the tax authority only needs to learn about the fact of owning a CIC in order to impose a fine, we recommend that you voluntarily inform the tax authority about it. Moreover, as we mentioned earlier, a large number of owners of KIK are exempted from paying tax on the profit of their foreign company.

Our law firm not only provides useful information, but can also assist with the completion and filing of a CPC notice. Therefore, if you do not want or do not have time to deal with the procedure yourself, we are always happy to help you with this.