On June 18, 2024, the President of Ukraine officially signed Law No. 3706-IX, which addresses Controlled Foreign Companies (CFCs). This law introduces significant changes to Ukrainian legislation, temporarily exempting companies from penalties for failing to submit reports and notifications related to CFCs during martial law and for six months following its conclusion. The new provisions will come into effect on July 1, 2024.
This law also regulates the processing and use of information received from taxpayers in the context of CFC compliance. Specifically, information provided under this law is classified as restricted access and cannot be requested or transferred to law enforcement agencies upon their request. It also cannot be used as evidence in criminal proceedings, which offers additional protection to companies during the period of martial law.
Details on the changes to the legislation concerning CFCs:
“Temporarily, from January 1, 2022, and during the period of martial law in Ukraine, introduced by the President’s Decree “On the Imposition of Martial Law in Ukraine” dated February 24, 2022, No. 64/2022, approved by the Law of Ukraine “On Approval of the President’s Decree “On the Imposition of Martial Law in Ukraine” dated February 24, 2022, No. 2102-IX, and for six months after the month in which martial law is terminated or canceled:
– Taxpayers are not subject to penalties for violations stipulated by the first to eighth paragraphs of Clause 120.7 of Article 120 of this Code;
– Taxpayers and their officials are not subject to administrative and criminal liability for violations related to the application of the provisions of Article 39-2 of this Code;
– Information and/or documents obtained by the controlling body in accordance with Article 39-2 of this Code:
– a) are classified as restricted access information, which cannot be requested and/or transferred to law enforcement agencies at their request or within the procedures provided for by the Criminal Procedure Code of Ukraine;
– b) cannot be considered as evidence in criminal proceedings within the meaning of Article 84 of the Criminal Procedure Code of Ukraine.
The statute of limitations provided for in Article 102 of this Code, for determining tax obligations related to the information contained in CFC reports, begins from the date of submission of such a report to the controlling body.”
Given this, many may wonder:
- Can I delay preparing and submitting CFC reports/notifications?
- Our team still advises against delaying submission, as by doing so, you will comply with all legal requirements and reduce the burden on yourself in the future. We sincerely believe and hope that martial law will end as soon as possible and, undoubtedly, with our victory. At that moment, you will have only six months to prepare all reports for all periods from 2022 until the calendar year of the end of martial law.