{"id":12380,"date":"2025-05-15T18:56:34","date_gmt":"2025-05-15T15:56:34","guid":{"rendered":"https:\/\/gls-law.company\/?p=12380"},"modified":"2025-05-15T18:56:37","modified_gmt":"2025-05-15T15:56:37","slug":"cfc-liquidation-who-is-the-controller-and-how-is-profit-taxed","status":"publish","type":"post","link":"https:\/\/gls-law.company\/en\/cfc-liquidation-who-is-the-controller-and-how-is-profit-taxed\/","title":{"rendered":"CFC Liquidation: Who Is the Controller and How Is Profit Taxed?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">\ud83d\udd0e <strong>Scenario<\/strong>: A Ukrainian LLC (on the general taxation system) owns 100% of a foreign company \u2014 a <strong>controlled foreign company (CFC)<\/strong>. The participants of the LLC are Ukrainian resident individuals. The question arises: <strong>who is the CFC controller and how is profit from its liquidation taxed?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udccc <strong>Who is the controller in this case?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">At first glance, it may seem that the individual shareholders are the controllers. However, under <strong>para. 39-2.1.2 of the Tax Code of Ukraine<\/strong>, if the interest in the CFC is held <strong>through a Ukrainian legal entity<\/strong> that meets the criteria \u2014 then the <strong>LLC is considered the controller<\/strong>, not the individuals.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u27a1\ufe0f Accordingly, the <strong>LLC is responsible for filing CFC reports and paying tax<\/strong> on the adjusted profits of the CFC.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2757\ufe0f Importantly, the law <strong>does not exempt<\/strong> the LLC from liability <strong>just because a beneficial owner (individual) submitted a CFC report<\/strong> independently.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udccc <strong>Do individuals have a tax obligation?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If the <strong>LLC is the controller<\/strong>, individuals <strong>do not need to declare income<\/strong> from the liquidation of the CFC until they <strong>receive actual distributions<\/strong> from the LLC \u2014 such as dividends or liquidation proceeds.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As a result, <strong>Personal Income Tax (PIT) is not applied<\/strong> to individuals in this context.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udcca <strong>What about accounting in the LLC?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A legal entity applying NAS (Ukrainian Accounting Standards) must follow <strong>NAS 12<\/strong> regarding financial investments. Upon liquidation, the investment in the CFC is <strong>written off<\/strong>, and tax differences are calculated under <strong>para. 140.5.4 of the Tax Code<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Profit or loss depends on the <strong>book value of the investment<\/strong> and the <strong>liquidation amount<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udccc <strong>GLS Law Recommendations:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2714\ufe0f Submit an <strong>Individual Tax Consultation (ITC)<\/strong> on behalf of individuals regarding:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>being recognized as a controller in case of indirect ownership of a CFC;<\/li>\n\n\n\n<li>taxation rules for such CFC profits.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u2714\ufe0f Submit an <strong>ITC on behalf of the LLC<\/strong> to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>confirm LLC status as a CFC controller;<\/li>\n\n\n\n<li>clarify that the LLC is not liable if the report was submitted by individuals (for risk mitigation).<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">\u26a0\ufe0f This is <strong>especially relevant in 2025<\/strong>, as the Ukrainian Tax Authority increases oversight of CFC filings and ownership chains. Even if individuals submit reports, the <strong>LLC may still be held liable<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\ud83d\udccc GLS Law supports:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>CFC structure analysis;<\/li>\n\n\n\n<li>reporting and documentation;<\/li>\n\n\n\n<li>tax modeling;<\/li>\n\n\n\n<li>ITC applications for both individuals and legal entities.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If your structure includes a foreign company \u2014 <strong>verify who the controller is and how to handle liquidation tax-efficiently<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\ud83d\udd0e Scenario: A Ukrainian LLC (on the general taxation system) owns 100% of a foreign company \u2014 a controlled foreign company (CFC). The participants of the LLC are Ukrainian resident individuals. The question arises: who is the CFC controller and how is profit from its liquidation taxed? \ud83d\udccc Who is the controller in this case? [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":12369,"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-12380","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\/12380","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=12380"}],"version-history":[{"count":1,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/posts\/12380\/revisions"}],"predecessor-version":[{"id":12381,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/posts\/12380\/revisions\/12381"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/media\/12369"}],"wp:attachment":[{"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/media?parent=12380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/categories?post=12380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gls-law.company\/en\/wp-json\/wp\/v2\/tags?post=12380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}