TP

Transfer pricing
For companies that carry out foreign trade activities, special attention should be paid to identifying those operations that are subject to transfer pricing.
Such operations are subject to an analysis on the subject of compliance with the principle of “arm’s length principle”.

The principle of “extended hand” is the correspondence of conditions of transactions between related parties (controlled operations) to conditions that apply in similar circumstances between unrelated persons (uncontrolled operations)

The companies whose annual income exceeds 150 million UAH (excluding indirect taxes) for the relevant tax year fall under the monitoring.

Transactions are considered controlled if:
  • may affect the object of taxation via income tax
  • the amount of transactions with each counterparty, calculated on the basis of the “extended hand” principle, exceeds 10 million UAH (excluding indirect taxes)
  • are carried out with non-resident counterparties, who:
registered in the states (territories) included in the approved list of the Cabinet of Ministers of Ukraine.
CMU Resolution No. 1045
carry out transactions between a non-resident and his permanent representative office in Ukraine
have an legal form included in the approved CMU list
CMU Resolution No. 480
are a related party to the taxpayer (including when performing an operation through intermediaries who do not perform essential functions and do not carry significant risks)
commissioners
What you should do if you have controlled operations
  • Submit the report by October 1st of the next year
  • Prepare the Documentation
  • In case of non-compliance, to the principle of an “extended hand”, conduct an adjustment of the financial result to count in the income tax

Responsibility

From July 1, 2019 living wage for able-bodied persons (PMTL) increased to 2007.0 UAH, Which automatically increases the amount of fines:
  • a fine 602 100,0 UAH. (for not submitting the Report); *
  • Fine up to 602 100.0 UAH. (1% of the amount of controlled transactions that were undeclared, but not more than 300 minimum living wages for an able-bodied person established on January 1, 2018, for all undeclared controlled operations); *
  • Fine up to 401,400.0 UAH (3% of the amount of controlled transactions for which no documentation was submitted, but no more than 200 living wages for an able-bodied person established as of January 1, 2018 for all controlled transactions completed in the corresponding reporting year). *

Important! After the final day of payment of the fine, 30 calendar days are provided for submitting an update report / documentation. Moreover, penalties will be charged until the report is submitted.

  • 10 035.0 UAH / day (5 PMTLs for 1 calendar day – for the late submission of an update report / documentation). *
  • 10 035.0 UAH / day (5 PMTLs for 1 calendar day – for the late submission of an update report / documentation). years, for all undeclared controlled operations); *
  • 2 007,0 UAH. / day (1 PMTL for 1 calendar day, but no more than 300 PMTL – for untimely submission of a report on QOs, untimely declaration of QoS in a report, provided that an update report has been submitted). *

*As of 01.08.2019

Transfer pricing documentation includes
  • description of the controlled operation
  • description of taxpayer activity
  • description of the Group, including the parent company and subsidiaries
  • description of counteragents
  • description of functions, risks and assets involved (functional analysis)
  • description of the markets in which the taxpayer conducts its activities
  • basis for the choice of method and the side for analysis
  • economic and comparative analysis to determine the compliance with the principle of “extended hand”

Who needs to prepare the Documentation

  • The company carries out controlled operations
  • The company carries out royalty payments in favor of a non-resident
  • The company carries out operations for the purchase of goods (including non-current assets), works, services from a non-resident, whose legal form is included in the approved list in the CMU, or a non-resident is registered in the state (on the territory), which is included in the approved list of the Cabinet of Ministers

  • In accordance with the operation of the principle of “extended hand”, the company does not increase the financial result of the tax (reporting) in accordance with paragraphs. 140.5.1 and 140.5.2 p.140.5 of st.140 TCU
  • In accordance with the operation of the principle of “extended hand”, the company does not adjust the financial result of the reporting period by 30% of the value of goods (including non-current assets), works, services in accordance with clause 140.5.4 of clause 140.5 of Art. 140 TCU
  • In accordance with the operation of the principle of “extended hand”, the company does not adjust the financial result of the tax (reporting) period to the amount exceeding the amount of royalties, increased by 4 percent of net income from the sale of products (goods, works, services) according to the financial statements for the year preceding the reporting year in accordance with paragraphs. 140.5.6 p.140.5 st.140 TCU

Our company offers the following services:

Advice on transfer pricing
Preliminary analysis and identification of controlled operations
Preparation of the report,
or analysis of a finished report
Preparation of a complete documentation package or separate sections.