Flash Report #70: Major changes likely for Transfer Pricing legislation

PwC, Kyiv, Ukraine, 
Tue, Dec 30, 2014

Today, Parliament passed the firstreading on changes to the Tax Code of Ukraine in respect of transfer pricing("TP") regulations.
The main changes, which are likely to apply from 2015, are the following:
 - The arm’s length principle has been officially introduced (replacingmarket price).
 - The list of related parties and controlled transactions for thepurposes of the TP regulations are expanded.
 - The criteria for recognition of controlled transactions have beenseparated for CPT and VAT purposes.
 - The threshold for controlled transactions has been reduced to UAH 1mln. or 3% of the taxpayer’s revenue with one counterparty (provided the totalannual revenue of  the taxpayer exceeds UAH 20 mln.).
 - The duration of a TP audit is increased to 18 months with an extensionof 12 months.
 - Priority of “official sources” of information will no longer apply.
 - New penalties for non-inclusion of controlled transactions into the TPreport are introduced (1% of the amount of controlled transactions).
 - Penalties for non-provision of TP documentation have been changed (3%of the amount of the controlled transactions).
 - If the price or profitability in the controlled transactions does notfall in the arm’s length range, TP adjustments will be made to a median level(not the lower / upper limit of the range as currently allowed).
We will update you further after the Draft Law is passed.

*TheDraft Law “On changes to the Tax Code of Ukraine in respect of improvement ofthe tax control on transfer pricing”  No. 1264-1  dated 22 December2014

 
Contacts:

Ron Barden,Partner & TLS Leader, ron.j.barden@ua.pwc.com
Slava Vlasov, Partner, Tax and Legal Services, slava.vlasov@ua.pwc.com
OlgaTrifonova,Senior Manager, Tax and LegalServices, olga.trifonova@ua.pwc.com

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