On 28 October 2021, the Cabinet of Ministers of Ukraine has adopted new procedures of preliminary coordination of advance pricing agreements (APAs) in controlled transactions, as a result of which agreements on preliminary coordination of pricing, which are unilateral, bilateral, or multilateral, are concluded for the purposes of transfer pricing through Decree No. 1114. The Decree replaces previous Decree No. 504 of 17 July 2015 which provided the procedure for obtaining APAs. The New Procedure will become effective from 1 January 2022.

This Decree defines the procedure of submission and consideration of proposals and applications. An APA is a written agreement concluded between a large taxpayer and the State Tax Service (STS) based on the pricing agreement, during which the criteria for determining the compliance of the conditions of controlled transactions carried out or to be carried out by the taxpayer with the arm’s-length principle.

APA can be extended to the entire reporting period in which it is concluded and/or to the reporting periods preceding its entry into force if such reporting periods are not inspected for compliance by the taxpayer with the arm’s-length principle.

The unilateral, bilateral, or multilateral nature of the agreement is determined by the taxpayer independently on the date of application to the STS, provided that the conclusion of a bilateral or multilateral agreement requires proof that the taxpayer’s counterparty has applied to a foreign state body authorized to administer taxes and tax administration.

A foreign tax authority is authorized to administer taxes and fees in case of a relevant double tax treaty between Ukraine and the state of the respective tax authority.

Any information, documents or materials received by the STS from the taxpayer during the APA approval procedure, including during the determination of the expediency of the application for the preparatory review, may not be disclosed or made public without consent.

For submission and consideration of proposals and applications the taxpayer sends to the STS by electronic form (if technically possible) using an electronic cabinet application with a qualified electronic signature in compliance with the Law of Ukraine “On electronic trust services”. Together with the application in electronic form, the taxpayer submits:

• copies of agreements (contracts) under which controlled transactions are carried out, indicating the supply chain (value creation) of goods (works, services) in controlled transactions;
• documentation on transfer pricing for controlled transactions, which are the subject of preliminary pricing approval, for the reporting (tax) year preceding the year of application in the case of controlled transactions in such reporting (tax) year;
• description of current tax disputes related to the subject of approval (if any);
• a description of the impact of an international agreement (convention) on the avoidance of double taxation between Ukraine and a foreign state, the resident of which is a party to a controlled transaction, on the subject of agreement (in the presence of such an agreement (convention);
• the results of the analysis of the possible impact of the terms of the agreement on the amount of tax liabilities of the parties to the controlled transaction;
• draft contract;
• a copy of the document confirming the authority of the authorized person of the taxpayer who will participate in the pricing approval procedure.

The taxpayer has the right to file an application without participating in the preparatory proceedings.

In the case of filing an application for the purpose of concluding a bilateral or multilateral agreement, the taxpayer shall additionally submit:

• a certificate or its notarized copy, which confirms that the party to the controlled transaction that a non-resident is a resident of the state in relation to which the international agreement of Ukraine on the avoidance of double taxation;
• copies of documents confirming the fact of application with the application for the procedure of coordination of pricing of the taxpayer’s counterparty in controlled transactions to the foreign tax authority of the state with which the agreement of Ukraine on avoidance of double taxation operates (in case of such application).

The application, documents, and materials required for the pricing approval procedure shall be prepared in Ukrainian. If documents prepared in a foreign language are submitted together with the application, the taxpayer shall simultaneously submit their translation into the Ukrainian language.

The first joint discussion shall take place no later than 30 calendar days from the date of receipt of the application by the STS. In the case of a bilateral or multilateral agreement, the State Tax Service shall, no later than 60 calendar days from the date of receipt of the application, apply to the foreign tax authority for consultations on the agreement.

The term of the contract is determined by the parties and may not exceed five calendar years.

On the basis of an application submitted for the purpose of extending the term of the agreement, the STS may extend the term of the agreement for no more than five calendar years.