The active phase of preparing the CFC report is over. All entrepreneurs who submitted a shortened or full CFC report by May 1, 2024, await confirmation from the tax authorities. But what about those entrepreneurs who have decided not to file a report or have filed only an abbreviated report? Our task is to define this clearly:
- Why should those who have not filed reports still submit or at least think about it?
- Why should those entrepreneurs who submitted an abbreviated report by May 1 prepare a full CFC report by December 31, 2024?
Mandatory CFC reporting was postponed until the war’s end
Let’s start with the legislative information.
On May 9, 2024, the Verkhovna Rada adopted in the second reading the draft Law on Amendments to the Tax Code of Ukraine and Other Legislative Acts of Ukraine on Improving the Implementation of Foreign Economic Operations for the Export of Certain Goods No. 10168-2 dated 06.11.2023.
PLEASE NOTE! This Law has yet to be signed at the time of publication of this material on 23.05.2024!
- In the second reading, the draft law was amended to provide that fines for failure to submit CFC reports would not be applied until the end of martial Law.
- Namely, it is envisaged to add a new clause 72 to subsection 10 of section XX of the Tax Code of Ukraine (hereinafter – the TCU) stating that, temporarily, from January 1, 2022, and during the period of martial Law in Ukraine, and six months after the month in which martial Law is terminated or canceled
- taxpayers shall not be subject to penalties for violations provided for in paragraphs one to eight of clause 120.7 of the TCU;
- the taxpayer and its officials are not subject to administrative and criminal liability for violations related to the application of Article 39-2 of the TCU;
What does all this mean? Have the penalties for CFCs been canceled?
In fact, yes. CFCs will not be penalized until the end of martial Law and six months after its completion.
If I did not prepare CFC reporting in 2024, can I forget about it? Good question!
- Firstly, we should consider that everything is changeable, and fines for CFCs may be returned. It would be best if you were prepared for anything.
- Secondly, we all hope that martial Law will end soon – with our victory. From that moment on, you will have only six months (6 months) to prepare all reporting for all periods (from 2022 to the calendar year of martial Law’s end).
You will have to
- prepare several times more financial statements and information for each CFC
- prepare reports in a limited time because ‘six months after martial law’ may mean that penalties will be charged from the first day after the end of this period (if the tax authorities do not have reports on your CFC)
- face other ‘troubles, ‘such as the postponement of fines for an indefinite period, which can easily lead to significantly increased amounts immediately after the end of martial Law.
What about those CFCs that submitted their reports on time by May 1, 2024?
Those CFCs that submitted their reports to the State Tax Service on time are well done! We all understand that this draft law was adopted not by May 1, 2024, as it could have been, but after the CFC marathon, when many entrepreneurs had prepared everything in good faith.
If you have already submitted a shortened report, it is better to close this issue and submit complete reports by December 31, 2024. The State Tax Service already has information about your CFC, and it is likely that it will be interested in your complete report in 2025.
Our team will monitor any changes. We inform our clients and partners promptly and try to minimize any risks of penalties. Contact us via WhatsApp, Telegram, or Viber, or submit an inquiry through our online form. Business Hours: Monday to Friday, 9:00 AM — 7:00 PM.
