Are entrepreneurs increasingly asking: Will penalties be imposed for violations of CFC rules? How can one avoid CFC compliance fines, and is it necessary to submit a CFC report? Below, we provide a concise and clear breakdown of each of these questions.
Penalties for breaches of the Controlled Foreign Company (CFC) rules are not applied during martial law (subject to specific conditions). This is not a blanket waiver of obligations, nor does it guarantee that earlier breaches will go unpunished after the war ends.
Law No. 3706-IX amended the Tax Code of Ukraine (TCU) to state that from 1 January 2022, for the duration of martial law and six months after the month in which it is terminated or revoked, taxpayers and their officers are not subject to administrative or criminal liability for violations related to Article 39-2 of the TCU.
Law No. 4113-IX further provides that taxpayers are not subject to financial sanctions for infringements listed in Article 120.7 of the TCU, provided they fulfil their Article 39-2 obligations within six months after martial law ends.
Article 120.7 covers penalties for:
- Failure to submit a CFC report by the controlling person
- Late submission of the CFC report
- Failure to disclose existing CFCs in the report or disclosure of inaccurate information
- Failure to notify the tax authority of acquiring a share in a foreign legal entity
- Failure to submit, or incomplete submission of, transfer pricing documentation.
What financial sanctions apply for CFC breaches?
Paying a CFC fine does not relieve the taxpayer from filing duties. If fined, the taxpayer must submit the required CFC reports within 30 calendar days after the deadline for paying the fine. Failure to submit even then triggers an additional penalty of five subsistence minima (PM) per calendar day of non-filing, capped at 300 PM (UAH 988,400 in 2025).
Important!
Although penalties for reporting breaches are suspended during martial law, CFC obligations remain in force. Controlling persons must notify the tax authorities about the start or end of control over a foreign entity and file CFC reports.
Need a consultation on CFC rules in Ukraine?
Get professional advice from our team
Suspension of CFC fines does not cancel tax liabilities. The moratorium covers reporting penalties only. If CFC-related tax is unpaid or paid late, other liabilities may arise, and the moratorium does not protect against them.
Our team is also subject to the CFC rules and filed the CFC notification within 60 days of company registration, on time and in full.
We recommend you do the same: don’t gamble with the tax authorities. Meet all deadlines to avoid CFC penalties. Send us a request via the website form or message us in your preferred messenger, we’ll help with the CFC notification and prepare you for CFC reporting.
Frequently asked questions about the accrual and avoidance of CFC penalties in 2026
Do penalties for CFC non-compliance remain in force during martial law?
What exactly is covered by the moratorium?
Breaches under TCU of Ukraine 120.7 (CFC report/notification, etc.), if you fulfil Article 39-2 duties within the six-month post-war window.
What CFC penalties apply after the moratorium?
- Failure to submit the CFC report — a fine of 100 subsistence minimums (332,800 UAH)
- Late submission of the report — a fine of 1 subsistence minimum per day of delay (from 3,328 UAH up to 166,400 UAH)
- A penalty of 3% of undisclosed transactions or 25% of the adjusted profit, whichever is lower (but not exceeding ₴3,328,000)
- No notification of acquiring a share within 60 days: 300 PM (approximately UAH 998,400 in 2026)
Does paying the fine remove the filing duty?
Is the CFC tax itself cancelled in Ukraine?
No. The moratorium applies only to reporting penalties. CFC-related tax obligations remain; non-payment can trigger financial, administrative, or even criminal consequences.
