TAX BASE FORMATION OF CONTROLLED FOREIGN COMPANIES: ACCOUNTING AND REGULATORY ASPECTS

Abstract

The article examines the theoretical and applied aspects of forming the tax base of Controlled Foreign Companies (CFCs) in the context of integrating accounting systems with international tax regulation mechanisms. The economic essence of CFC rules is revealed as an important instrument for counteracting base erosion and profit shifting within the globalized economy characterized by high capital mobility and digitalization of business processes. Particular attention is paid to the role of CFC regulation as a tool for ensuring tax transparency, preventing artificial profit allocation across jurisdictions, and strengthening the fairness of international taxation systems.

The study analyzes regulatory approaches developed by the Organization for Economic Co-operation and Development (OECD) and the European Union, including BEPS initiatives and ATAD provisions, focusing on methodological principles for determining adjusted CFC profits and their incorporation into national tax systems. The implementation of CFC rules in Ukraine is considered through the prism of recent amendments to tax legislation aimed at harmonizing domestic practices with European standards and international tax compliance requirements. Special emphasis is placed on accounting challenges associated with the transformation of foreign financial statements, differences between accounting standards, currency translation procedures, and the identification of the economic substance of cross-border transactions.

An accounting and analytical model for forming the CFC tax base is substantiated, integrating accounting, analytical, and regulatory components into a unified framework for tax compliance. The model demonstrates how financial reporting data are transformed into taxable indicators through analytical evaluation and regulatory adjustments. The research also identifies the impact of wartime conditions on the practical application of CFC rules in Ukraine, highlighting the emergence of “anti-crisis CFCs” as instruments supporting business continuity, export resilience, and operational adaptation under economic uncertainty.

The proposed approaches contribute to improving tax transparency, reducing tax risks, enhancing tax administration efficiency, and promoting the development of digital compliance tools. The findings support further harmonization of Ukraine’s taxation practices with EU regulatory standards and provide methodological foundations for improving international tax governance in conditions of economic transformation and European integration.