A law “On the Amendments to the Tax Code of Ukraine Regarding Transfer Pricing” passed its second and final reading on 4 July 2013 and was adopted by the Ukrainian Parliament. This legislation will become effective from 1 September 2013.
The new legislation has made a number of changes to the transfer pricing rules in Ukraine. The documentation requirements have been strengthened and the transfer pricing position of taxpayers is more likely to be covered in depth in tax audits.
The law abolishes the previously permitted 20% deviation from the market price, limits the list of domestic controlled transactions, and introduces special transfer pricing audits. An obligation for taxpayers to prepare and file a notification on controlled transactions and a transfer pricing documentation file has been introduced.
According to the new provisions large taxpayers are obliged to submit transfer pricing documentation within 2 months of a request from the tax authorities. All other taxpayers will have to submit transfer pricing documentation within 1 month of a request and all taxpayers will be obliged to file reports on their controlled transactions annually by May 1st of the year following the reporting year.
New penalty provisions for non-compliance will be imposed. For failure to file a notification of a controlled transaction, 5% of the total value of the controlled transaction will be imposed and for failure to file transfer pricing documentation (for large taxpayers), a fine amounting to 100 minimum wages will be imposed.
