CFC: Who Must Report and How to Avoid Fines of Up to UAH 3 Million
Just two years ago, Controlled Foreign Companies (CFCs) seemed to many like a “phantom obligation” that could be postponed. But in January 2026, the situation became critical: the transitional periods ended, and the tax authorities equipped themselves with automated monitoring tools.
According to statistics, about 60% of controllers still have not filed reports for previous years. If you are among them, this material is for you. We explain how the control system works today and how to prepare for reporting in 2026.
CRS in 2026: how the tax authorities find out about your business
The main change in 2025–2026 is the full-scale launch of CRS (Common Reporting Standard). This is an automatic exchange of information on financial accounts.
How it works: A foreign bank sees that you are a tax resident of Ukraine and transfers data about your accounts (and your company’s accounts) to its tax authority, and it then sends the data directly to the State Tax Service of Ukraine.
More than 60% of controllers did not file reports for 2024. The STS has already launched mass audits based on automatic CRS exchange data.
Read more about what the CRS agreement is in a separate article.
Result: The tax authorities receive data on account balances, cash flows, and beneficial ownership status without any requests. Now it is almost impossible to hide a company through “nominees” or offshore structures.
In practice, we are already seeing requests from the STS generated solely on the basis of CRS data, without any prior explanations from the taxpayer.
If you are not sure whether your structure falls under automatic exchange, our accountants will help you carry out an analysis and prepare a CFC report for the tax authorities.
Who is considered a CFC controller
Many people believe that if their last name is not on the list of founders, they do not have to report. This is the most dangerous mistake.
- Legal control: You own a share of more than 50% (or 10% if, together with other Ukrainians, the total is more than 50%).
- Actual control: You are considered a controller if you:
- Have a power of attorney to manage the account for a period of more than 1 year.
- Act as a signatory or give instructions to directors.
- Are listed as a beneficial owner in bank questionnaires (KYC).
Important: If you dispose of the funds of a foreign company, the STS will consider you a controller even if, de jure, the owner is a foreigner.
When the tax = 0%, but reporting is mandatory
The law allows you not to pay taxes on CFC profits in certain cases, but tax exemption does not equal exemption from reporting.
If the total income of all the controller’s CFCs is less than EUR 2 million, the tax is 0%. However, you must file a report and confirm this income with financial statements.
If the company is actually operating (trading, manufacturing) and not just receiving passive dividends or royalties, taxes in Ukraine may not be charged (if there is a double taxation avoidance agreement).
Even if the company did not conduct any activity, you are required to file an “empty” report.
CFC penalties in 2026: current amounts
In 2026, penalties are tied to the subsistence minimum, which has increased. Now the figures look like this:
*(within 60 days after opening/changing the share)
The Tax Code provides an exemption from penalties for CFC violations committed during martial law, BUT only if you submit the reports within 6 months after it ends. At the same time, no one отменял interest for late tax payment (if it was assessed).
Exemption from penalties during martial law does not mean exemption from interest. Interest for late payment of CFC profit tax is начисляется automatically.
The statute of limitations for CFC matters is 2,555 days (7 years). This means the tax authorities may “catch up” with you for mistakes made in 2025 even in 2032.
Don’t risk your capital – a CFC report filed on time CFC report costs much less than penalties.
CFC reporting 2026: what you need to do by May 1
If you are an individual controller, your deadline is May 1 (together with your income tax return).
- Conduct a CFC audit: Review all foreign structures, including “dormant” ones and trusts.
- Prepare Financial Statements: CFC financial statements for 2025 under the standards of the country of registration (GAAP or IFRS).
For companies with a large turnover, the STS may require an audit report for the foreign company. If you submit a report without an audit when it is mandatory, the report is considered not submitted.
- Calculate your share: If a CFC has several Ukrainian partners, align the numbers so that the reports you submit do not contradict each other.
- Determine the status: Whether you are submitting a full or a simplified report (a simplified report is filed if the financial statements abroad are not ready yet, but the full report will still need to be added by the end of the year).
In practice, preparing CFC financial statements takes 3 to 6 weeks, so postponing preparation until April is a critical mistake.
Common questions about filing CFC reports
1. Do I need to file a CFC report if the company was not operating?
Yes. A “dormant” company is subject to reporting. Even companies with strike-off status or those in the liquidation process must be declared until the procedure is fully completed. The Tax Code does not exempt you from the obligation to file a report in the absence of activity.
2. Do I need to pay tax if the CFC income is less than 2 million euros?
The tax may be 0%, but the report must be filed together with the financial statements.
3. Who is considered the controller if the company is registered to a nominee?
The controller is the person who actually disposes of the funds or is listed as the beneficial owner at the bank.
4. What is the penalty for not filing a CFC report in 2026?
The fine for failing to file a report may exceed UAH 300,000, and for incomplete disclosure – up to UAH 3 million.
5. Can I submit a simplified CFC report?
Yes, if the financial statements are not ready yet. However, the full report must be filed later.
Conclusion
In 2026, CFC reporting has become “digital” and transparent. The STS no longer waits for you to admit it – it compares your declarations with automatic exchange data. The best strategy today is to conduct an audit for previous years and close any “loose ends” before the tax office sends a request with a calculated penalty.
The absence of tax payable or a “dormant” company status does not exempt you from the reporting obligation. And the cost of mistakes or ignoring the law today is measured in millions of hryvnias in fines, which, due to automated control, are only a matter of time.
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