On 1 July 2014, the Ministry of Revenues and Levies of Ukraine has issued Order No.368 which approves an updated of “Generalized Tax Consultation on Application of Certain Provisions of the Tax Legislation on Transfer Pricing.”
The Order included additional questions and clarifications and drastically changed certain previous interpretations of the tax authorities. Overall, the Order sets out a new version of the previous generalized consultation on transfer pricing, approved by the Ministry’s Order No. 699 on 22 November 2013.
The most important points are summarized below:
Parameters not to be taken into account
Exclusion of some transactions from UAH 50 million threshold
- Dividends, investments, value of give-and-take raw materials from non-residents and respective final products, principal amount of loans and credits, deposits and repayable financial aid should be ignored upon calculation of the UAH 50 million threshold of controlled transactions. Previously the tax authorities had absolutely opposite position in this regard.
Parameters to be taken into account
Extension of scope of controlled transactions (subject to UAH 50 million threshold)
The transactions deemed to be controlled;
- Indirect sales of goods to non-resident related party via non-related commissioner (agent)
- Transactions with related individuals which are residents of Ukraine.
- Transactions with related parties which are paying VAT and CPT at standard rates but paid withholding tax during the reporting period.
In addition, the tax authorities confirmed that taxpayers are not allowed to submit any adjusting CPT and VAT tax returns for the period which is being subjected to TP audit (even if such adjustments do not relate to controlled transactions subjected to the audit). As a result, during the whole term of TP audit, taxpayers will not be able to submit adjusting CPT and VAT tax returns for the audited period (statutory term for TP audit is 6 months with possible prolongation for another 6 months).
