Representative Functions for Non-Resident Companies

We draw your attention to the fact that according to Article 39 of the Tax Code of Ukraine (TCU), the performance of representative functions on the basis of an authorization from a non-resident company by a citizen of Ukraine may be equated to Permanent Representation with corresponding tax consequences. In addition, this fact may define a person as having actual control in a CFC (controlled foreign company).

Article 39 of the TCU contains a direct provision that specialists who perform professional activities (auditors, lawyers) do not fall under the category of persons carrying out actual control.

K.A.C. Group offers the service of representative functions provision by Law Firm “Prime” and Audit Firm “Kyiv Audit Service”.

In order to perform such functions, an agreement on the provision of professional duties is concluded with a list of such duties, details of the lawyer’s or auditor’s certificate, reference to the auditor’s and lawyer’s legal professional privilege. A Power of Attorney is issued from a non-resident company with an exclusive list of functions, excluding the conclusion of commercial agreements, property management and bank account management.

Within the framework of these documents, one-time orders for the performance of certain functions that do not fall under the signs of actual control may also be issued to third parties.

At the time of hostilities, a significant part of the business switched to “online” mode of operation or suspended the work of offices. Consequently, the issues of security and confidentiality of financial and economic documents have become relevant. As part of the signed agreement for the provision of professional services, such documents may be handed over to lawyers and auditors for safekeeping. In this case, the confidentiality of the information contained in the documents is protected by the relevant articles of the Law of Ukraine “On Advocacy and Attorney Activity” and the Law of Ukraine “On Audit of Financial Statements and Auditing Activity”.