Introduction
The liquidation of a foreign company is often perceived as the finalstep: business operations have ceased, bank accounts have been closed, and thecompany has been struck off the register. However, additional matters remain tobe addressed by its owner, provided that they are a Ukrainian tax resident.
If a foreign company qualifies as a Controlled Foreign Company (CFC),certain requirements under Ukrainian law must still be fulfilled following itsliquidation: the State Tax Service of Ukraine (STS) must be notified of thetermination of control, and a final CFC report must be filed. These obligationsare easily overlooked, as the owner typically assumes that the entire processis complete once the business has been formally closed.
Let us examine when control over a CFC is deemed to cease, what stepsmust be taken following its liquidation, and under what circumstances allrelated reporting and compliance obligations in Ukraine are consideredfulfilled.
When Does Control Over a CFCCease?
The application of the CFC rules is governed by Article 39² of the TaxCode of Ukraine. However, the owners’ decision to liquidate a company or thecommencement of the relevant liquidation proceedings does not, in itself,automatically terminate an individual’s status as a controlling person.
According to the STS, for a Ukrainian tax resident, the date on whichtheir status as a controlling person ceases is the date on which the foreigncompany’s liquidation is recorded in the relevant foreign register.Accordingly, what matters is the official completion of the liquidationprocedure, rather than the date on which the decision to initiate it wasadopted.
Once the liquidation has been completed, official documentary evidenceconfirming the fact and date of liquidation should be obtained. This documentwill be required to fulfil the subsequent CFC reporting and complianceobligations in Ukraine.
Notifying the STS FollowingLiquidation
Once control has ceased, a separate obligation arises to notify the STSaccordingly. In this regard, it is important to distinguish between controlarising from an ownership interest in a foreign company and actual control overthat company.
Ownership-based control arises where a Ukrainian tax resident directlyor indirectly holds an ownership interest in a foreign legal entity at or abovethe threshold established under Article 39² of the Tax Code of Ukraine.
Actual control exists independently of formal ownership and refers to anindividual’s ability to exercise significant or decisive influence over thedecisions of a foreign company.
Subparagraph 39².5.5 of the Tax Code of Ukraine requires the STS to benotified both when an ownership interest is disposed of and when actual controlceases, provided that the relevant event results in the loss of controllingperson status.
Where a CFC is liquidated, the notification must be submitted within 60calendar days following its official liquidation. The notification procedure isgoverned by Order No. 512 of the Ministry of Finance of Ukraine dated 22September 2021. Therefore, once the supporting document has been obtained, itis advisable to record the date on which the company was struck off theregister and ensure compliance with the statutory filing deadline.
The Company Has Been Liquidated –Does This Mean CFC Reporting Is Complete?
No. Even if a foreign company ceases to exist during the year, a CFCreport must still be filed for the period of that year during which theUkrainian tax resident remained its controlling person.
Following the company’s official closure, two further steps remain:
Notify the STS of the termination of control. The relevant notification must be submitted withinthe statutory deadline.
Submit the final CFC report. The report is prepared on the basis of the company’s financialstatements for the relevant reporting period, taking into account the date onwhich control ceased. Individuals submit the report together with their annualIndividual Income and Property Tax Return, while legal entities submit ittogether with their Corporate Income Tax Return.
Accordingly, striking a company off the register does not conclude theUkrainian compliance process. The applicable reporting requirements anddeadlines must still be met.
A Practical Consideration toBring to the Client’s Attention
In my work on the liquidation of foreign companies, I have encounteredcases where, after receiving confirmation that a company had been struck offthe register, the client considered the entire process complete. The company nolonger exists, so it seems entirely reasonable to assume that no furtherreporting obligations apply.
However, for a Ukrainian tax resident, the liquidation of a company doesnot necessarily mean that all CFC-related obligations associated with it havebeen discharged.
Suppose a foreign company is liquidated on 15 September 2026. From thatdate, an individual who is a Ukrainian tax resident ceases to be itscontrolling person. Nevertheless, a final CFC report must still be submittedfor the part of 2026 preceding the liquidation:
For an individual, the deadline for submitting this report, togetherwith the annual Individual Income and Property Tax Return and copies of thefinancial statements, is 1 May 2027.
If the financial statements are not yet available and it is thereforeimpossible to submit a full CFC report by 1 May, a simplified CFC report mustfirst be filed, followed by the full report no later than the end of 2027.
The reporting process may give rise to tax liabilities where theadjusted profits of the CFC are included in the taxpayer’s taxable income.Consequently, the final step is to settle any resulting tax liabilities inUkraine.
It is therefore essential to distinguish between the date on which aforeign legal entity is officially dissolved and the date on which all itsCFC-related obligations in Ukraine have been fully discharged.
Financial Statements: What ShouldBe Considered in Advance
One of the key aspects of liquidating a foreign company is ensuring thatits financial documentation is prepared in a timely manner. To comply with CFCreporting requirements, duly certified copies of the company’s financialstatements must be available, as these form the basis for determining itsfinancial results.
Since the reporting period may end on the date on which control over thecompany ceases, it is advisable to prepare the necessary accounting records andfinancial data in advance, before the liquidation process is completed.
Furthermore, particular attention should be paid to distributions madeto the owner (such as dividends), where funds or assets were distributed duringor prior to liquidation. Such distributions are subject to separate taxation inUkraine and must be declared separately from the CFC’s general income.Accordingly, all supporting documentation must be retained.
When Can the Process Truly BeConsidered Complete?
Following liquidation, it is advisable to carry out a final compliancecheck to ensure that:
• Official documentary evidence ofthe company’s liquidation, specifying the relevant date, has been obtained;
• The notification has beensubmitted to the STS within the 60-day statutory deadline;
• The financial statements andsupporting documentation required for the CFC report have been collected;
• The final CFC report has beensubmitted together with the annual tax return and the relevant CFC appendix;
• Any resulting tax liabilitieshave been paid;
• All final accounting andliquidation documents have been retained.
Compliance with CFC obligations should be monitored while the company isstill undergoing liquidation, rather than postponing these matters until thepreparation of the annual tax return.
Conclusion
The liquidation of a foreign company and the fulfilment of CFC-relatedobligations in Ukraine are two separate processes. Even after a company hasbeen struck off the register, the STS must still be notified of the terminationof control, and a final CFC report must be submitted.
Therefore, the relevant tax obligations should be taken into account atthe liquidation stage to ensure that all necessary documentation is prepared inadvance and the applicable statutory deadlines are met.
Useful Resources
Article 39² of the Tax Code of Ukraine – the principal rules governing CFCs.
Ministry of Finance Order No. 254dated 25 August 2022 – the procedure for preparingCFC reports.
