{"id":11648,"date":"2025-03-25T16:37:01","date_gmt":"2025-03-25T14:37:01","guid":{"rendered":"https:\/\/gls-law.company\/?p=11648"},"modified":"2025-03-25T16:37:03","modified_gmt":"2025-03-25T14:37:03","slug":"controlled-foreign-companies-cfcs-key-reporting-aspects-in-2025","status":"publish","type":"post","link":"https:\/\/gls-law.company\/en\/controlled-foreign-companies-cfcs-key-reporting-aspects-in-2025\/","title":{"rendered":"Controlled Foreign Companies (CFCs): Key Reporting Aspects in 2025"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">\ud83d\udd39 <strong>Why is this topic important now?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Spring 2025 is here, but not everyone has submitted their CFC reports for 2023 yet.<\/li>\n\n\n\n<li>Many have relaxed, as there are no penalties for late submission\u2014yet delaying is risky.<\/li>\n\n\n\n<li>March-April is the last period to submit the shortened CFC report for 2024.<\/li>\n\n\n\n<li>Martial law won\u2019t last forever, and once it ends, we\u2019ll have limited time to settle all tax obligations.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udd39 <strong>Will there be penalties for late CFC reporting?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Currently, there are no penalties due to deferrals.<\/li>\n\n\n\n<li>However, tax authorities are already sending mass inquiries about CFCs.<\/li>\n\n\n\n<li>Ignoring them can result in fines (approximately one minimum wage).<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How to handle CFC reporting in 2025?<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">\u2705 <strong>What if financial data for 2024 is not yet available?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Submit a <strong>shortened CFC report<\/strong> (without financial figures) by <strong>May 1, 2025<\/strong>.<\/li>\n\n\n\n<li>Simultaneously file the <strong>2024 asset declaration<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u26a0\ufe0f <strong>Is it difficult?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The <strong>shortened CFC report<\/strong> is very simple (takes about 15 minutes to complete).<\/li>\n\n\n\n<li>The <strong>asset declaration<\/strong> may have complexities:\n<ul class=\"wp-block-list\">\n<li><strong>Sole proprietorship income<\/strong> \u2013 straightforward.<\/li>\n\n\n\n<li><strong>Foreign income<\/strong> \u2013 more complex (dividends, foreign taxes paid).<\/li>\n\n\n\n<li><strong>Investment profits<\/strong> \u2013 require proper calculations (e.g., Interactive Brokers).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Solution<\/strong>: Don&#8217;t wait until the end of April\u2014submit now.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u274c <strong>What to do with financial figures in the CFC annex if data is missing?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Enter <strong>zeros<\/strong> (this is allowed).<\/li>\n\n\n\n<li>However, the <strong>CFC annex must still be submitted<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Tax Authority Inquiries on CFCs<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udccc <strong>Mass letters from the tax office<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The tax authority is sending <strong>&#8220;mass reminders&#8221;<\/strong> without legal grounds.<\/li>\n\n\n\n<li>These are <strong>not official requests<\/strong> requiring a response.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u26a0\ufe0f <strong>Real tax authority inquiries<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Ignoring official requests is risky<\/strong>.<\/li>\n\n\n\n<li>While fines are small, ignoring them can lead to audits.<\/li>\n\n\n\n<li>The tax office <strong>collects CFC data through banks and automatic exchanges of information<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Risks for those who haven\u2019t reported for 2022-2023<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Many individuals <strong>haven\u2019t submitted CFC notifications for 2022-2023<\/strong>.<\/li>\n\n\n\n<li>If a CFC was <strong>created or acquired in 2022 or later<\/strong>, a notification <strong>must be filed<\/strong>.<\/li>\n\n\n\n<li>This can be done <strong>quickly and online (15-20 minutes)<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udca1 <strong>How to avoid CFC issues in the future?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">1\ufe0f\u20e3 <strong>Monitor the financial structure of your CFC<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If a CFC earns <strong>passive income<\/strong> (dividends, royalties), additional taxes may apply.<\/li>\n\n\n\n<li><strong>Solution<\/strong>: Proper structuring\u2014e.g., a separate <strong>holding company for dividends<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">2\ufe0f\u20e3 <strong>Avoid mistakes in financial reporting<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The tax office is <strong>analyzing CFC financial statements<\/strong> and comparing data across companies.<\/li>\n\n\n\n<li><strong>Discrepancies<\/strong> could lead to <strong>tax reassessments<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">3\ufe0f\u20e3 <strong>Be aware of international information exchange<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Ukraine participates in <strong>CRS (Common Reporting Standard)<\/strong>.<\/li>\n\n\n\n<li>Tax authorities receive <strong>data on foreign accounts and companies<\/strong>.<\/li>\n\n\n\n<li><strong>Delaying reporting is risky<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What about tax residency?<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The tax office is actively <strong>keeping individuals as Ukrainian tax residents<\/strong>.<\/li>\n\n\n\n<li><strong>Sole proprietorships, real estate, registration, and even utility payments<\/strong> are used as arguments for residency status.<\/li>\n\n\n\n<li><strong>There are court rulings that challenge these approaches<\/strong>.<\/li>\n\n\n\n<li><strong>Best option<\/strong>: Obtain an official <strong>individual tax consultation (IPK)<\/strong> and challenge it in court if necessary.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udccc <strong>Are there penalties for CFCs?<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Penalties for late CFC report submission are temporarily suspended<\/strong>.<\/li>\n\n\n\n<li>But don&#8217;t rely on indefinite exemptions\u2014<strong>file on time<\/strong>.<\/li>\n\n\n\n<li><strong>Penalties may apply<\/strong> for failing to complete lines <strong>31-33<\/strong> in the CFC annex.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\ude80 <strong>Conclusions: What should you do right now?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2705 1. <strong>Check<\/strong> whether the <strong>CFC notification for 2022-2023<\/strong> has been submitted.<br>\u2705 2. <strong>Submit the shortened CFC report for 2024<\/strong> by <strong>May 1, 2025<\/strong>.<br>\u2705 3. <strong>Prepare the 2024 asset declaration<\/strong>.<br>\u2705 4. <strong>Don&#8217;t wait<\/strong> until the end of the year\u2014if financial data is available, submit the <strong>full CFC report<\/strong> earlier.<br>\u2705 5. <strong>Ensure proper CFC structuring<\/strong> to avoid unnecessary taxes.<br>\u2705 6. <strong>Consider tax residency<\/strong> and, if needed, obtain an official <strong>IPK<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83c\udfaf <strong>Key Takeaways<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udca1 <strong>War and deferred penalties don\u2019t mean you can ignore tax obligations<\/strong>.<br>\ud83d\udca1 <strong>Sooner or later, control will tighten, and postponed issues will accumulate<\/strong>.<br>\ud83d\udca1 <strong>The solution? Act early and seek professional advice<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\ude80 <strong>Don&#8217;t wait\u2014submit your reports now!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\ud83d\udd39 Why is this topic important now? \ud83d\udd39 Will there be penalties for late CFC reporting? How to handle CFC reporting in 2025? \u2705 What if financial data for 2024 is not yet available? \u26a0\ufe0f Is it difficult? \u274c What to do with financial figures in the CFC annex if data is missing? Tax Authority [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":11634,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[222],"tags":[],"class_list":["post-11648","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cfc"],"_links":{"self":[{"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/posts\/11648","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/comments?post=11648"}],"version-history":[{"count":1,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/posts\/11648\/revisions"}],"predecessor-version":[{"id":11649,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/posts\/11648\/revisions\/11649"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/media\/11634"}],"wp:attachment":[{"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/media?parent=11648"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/categories?post=11648"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/tags?post=11648"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}