Preparation of CFC financial statements

CFC financial statements: IFRS preparation, audit

CFC is an unincorporated company that is not a resident of the state where it is based. The financial statements of CFCs (these are controlled foreign companies) are always required by law. This type of reporting is especially relevant for offshore companies. We will help you to write a report correctly.

How to determine the profit of a CFC?

This is possible in two ways:

• according to financial statements prepared on the basis of the personal law of the CFC for the financial year or in accordance with IFRS;
• according to the rules of Chapter 25 of the Tax Code of the Russian Federation, established for companies registered in the Russian Federation.

The first way seems to us simpler. An audit of financial statements prepared in accordance with IFRS is necessary for offshore companies registered in Belize, BVI, Liechtenstein, Monaco and all other countries that do not exchange tax information with the Russian Federation. If countries exchange such information and are not included in the “black list” - No reporting audit required!

When submitting a Notice of participation in foreign organizations, it is not necessary to attach reports and audit, as well as when submitting a Notice of a CFC. But here it is important to consider: the tax authorities can understand that the threshold has not been exceeded without receiving a 3-NDFL declaration. Clarifications may be required regarding the facts stated in the documents. In this case, the financial statements and the auditor's report will still be needed. Conclusion: there is a request from the tax authorities - you provide it, no - you do not need to provide it.

The 3-NDFL declaration is submitted only if the threshold allowed by law has been exceeded. In this case, the financial statements of the CFC and the auditor's report on it will definitely need to be attached to the declaration.

CFC rules do not allow the use of standard offshore schemes. Part of the income of such foreign companies is included in the income of an individual or legal entity in the country where he is a tax resident. It is necessary to notify fiscals of all sales and purchases. After the tax office can send letters in which they will ask for clarification on something. And, unfortunately, even fined.

The world community has begun the fight for tax transparency, the BEPS plan (from English – "Base erosion and profit shifting") has appeared – action plan to counter the withdrawal of profits. Large foreign companies will not want to work with businesses from the “gray” zones, that is, with those countries that will not join this plan. Cooperation with such a business puts an end to the business reputation of the company, cooperation with these countries is unprofitable.

The owner of the company with a package of 50% + 1 share is considered the person who controls the CFC. Such a person manages the bank account and can block transactions. The company is also controlled by the person specified as the beneficiary when opening a bank account.

It's time to analyze the structure of your business. So you will be fully equipped, and tax audits will not take you by surprise.

For more information, please contact our consultants. Contacts can be found in the corresponding section of the website of the company "Crystal.tax"

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