🌍 We hosted a live broadcast dedicated to one of the most pressing topics in international taxation—the “substance” of foreign companies and CFCs. Together with Svitlana Moroz and Kateryna Ryzhenkova, we analyzed how tax authorities currently view foreign structures from the inside.

📍Key takeaway: Substance isn’t just an office, an address, or a director “for show.” This answers the question: where is the business actually located?
The State Tax Service is interested in:

✅ who actually manages the company and makes decisions;
✅ where its employees are located;
✅ whether their qualifications match the company’s functions;
✅ whether salaries, expenses, and staffing levels are commensurate with revenue;
✅ where the actual center of management is located;
✅ who has access to bank accounts;
✅ who actually performs business functions;
✅ Does the company have a website, business operations, an office, or an organized remote infrastructure?;
✅ Does its activity leave a documentary and financial trail?

🔻 A particularly telling red flag is a foreign company with millions in revenue but no employees or just one nominal director earning a token salary.

Royalties and intellectual property deserve special attention.

The mere fact that a trademark is legally registered to a company in Cyprus, the Netherlands, or another jurisdiction does not necessarily mean that this particular company has the right to receive all the economic benefits from the IP.

The focus is on the DEMPE logic: who created, developed, maintained, protected, and exploited the intangible asset, and who actually bore the corresponding costs.
If marketing, the team, advertising, legal protection, and management are based in Ukraine, while royalties are simply transferred to a foreign company with no actual functions—such a structure becomes vulnerable.

Another key takeaway from the broadcast: “substance” is not a set of documents prepared in anticipation of an audit, but a real business process that must leave a documentary and financial trail. And most importantly—all of this must correspond to the economic substance of the business.

The world of international taxation is changing. What was perceived just a few years ago as a routine “tax optimization structure” may today become the subject of a detailed tax analysis.

👉So ask yourself: “Can I prove that this company actually exists, is actually operating, and that it is precisely there that decisions are made and its economic value is created?”