Reporting on Controlled Foreign Companies and the Importance of Reliable Service Providers

Risks of Missing Deadlines and Errors in Reporting

Entrepreneurs often remember the obligation to inform the state about their foreign activities only close to the deadline. In such situations, the risk of making mistakes is high, especially when service providers turn out to be unreliable.

So it happened that a client with a foreign company approached us at the very end of the reporting period, needing to attach the company’s accounting statements to the CFC notification. However, the foreign accountant stopped responding, and the client did not know whether any reporting for his company had been submitted at all.

Penalties for Non-Submission of Reporting

What happens when reporting is not submitted? Correct — penalties.

And it is one thing when penalties are issued in another country, but in Russia the penalty for failing to submit translated financial reporting together with the CFC notification is 500,000 rubles. And this is for one company — usually there are several.

It is possible, of course, to rely on certain provisions of the Code of Administrative Offences of the Russian Federation that allow a significant reduction of penalties, but this is still an unpleasant situation. It is doubly frustrating when an entrepreneur did everything correctly, organised all processes, and then encounters such an expensive error by a service provider. Fortunately, the situation was relatively simple, but swift action was required.

The Importance of Reliable Service Providers

This case clearly demonstrates how important it is to choose consultants and service providers carefully. Reliable specialists can significantly reduce the risk of such situations and ensure the timely completion of all required procedures.

There are many qualities that professionals whose actions affect your business must possess. Reliability should be one of the key ones.