Investment analysis by Ruslan Averin — originally published at averin.com.
Ukraine's controlled foreign company rules are the part of the tax code most likely to catch someone who thinks they have no Ukrainian tax problem at all — because the trigger is ownership, not income, and the largest penalty is for silence rather than for underpayment.
Who is caught
You are a controlling person if you are a Ukrainian tax resident and you hold more than 50% of a foreign entity. Or more than 10%, where Ukrainian residents together hold more than 50%. Or if you exercise actual control without holding anything on paper — a bank signature, a general power of attorney, the ability to direct the company's business.
The last route is the one that surprises people. A nominee structure where a Ukrainian resident runs the company but does not own it is a CFC.
The rates
| Situation | PIT | Levy | Total |
|---|---|---|---|
| Undistributed adjusted profit | 18% | 5% | 23% |
| Distributed as dividends before the deadline | 9% | 5% | 14% |
Distributing before the reporting deadline is worth nine percentage points. That is a scheduling decision, and it is available every year.
The two exemptions
One. The combined profit of all your CFCs does not exceed EUR 2 million for the year.
Two. The CFC sits in a jurisdiction with a double taxation treaty with Ukraine and pays profit tax at an effective rate of at least 13%.
Both remove the tax. Neither removes the report. This is the trap, and it is the trap the fines are built around: a controller with a dormant company and no profit still files, every year, or pays 332,800 hryvnia for not doing so.
The fines, at 2026 values
| Violation | Multiple | Amount |
|---|---|---|
| CFC report not filed | 100 subsistence minimums | 332,800 UAH |
| Notification of participation not filed | 50 | 166,400 UAH |
| Taxable CFC profit understated | 10 | 33,280 UAH |
They scale with the subsistence minimum for able-bodied persons, set at 3,328 UAH from 1 January 2026. The number rises every year the budget raises that figure — the 2024 report carried a 302,800 UAH fine on the same rule.
What the report contains
Financial statements of the foreign company, the ownership structure, evidence of profit, dividends and taxes paid, with foreign-language documents translated into Ukrainian and certified. In practice the binding constraint is the foreign company's own accounts: if they are not prepared and audited on a schedule that clears the Ukrainian deadline, the report cannot be assembled on time no matter how organised the controller is.
How I read it
The economics of a small foreign company changed the day these rules started being enforced. A dormant Estonian or Cypriot entity kept alive "in case it is useful" now costs the local maintenance fees, plus Ukrainian accounts preparation, plus the annual report — and generates a six-figure hryvnia exposure the first year someone forgets.
The decision most people are actually facing is not how to structure the CFC. It is whether the company should exist at all. Under the EUR 2 million threshold and with no operating need, liquidation is frequently the cheaper answer, and the one that ends the reporting obligation rather than managing it.
If the company stays, the calendar matters more than the structure: distribute before the deadline for 14% instead of 23%, and file in every year including the empty ones.
More market analysis by Ruslan Averin at averin.com.
