On 2 June 2022, the Ukrainian State Tax Service (STS) has published a notification that clarifies transfer pricing requirements under martial law conditions in Ukraine, taking into account of COVID-19 situation.
Transfer pricing reports
According to the notification, the taxpayer has the obligation to prepare the following reports in 2022:
- Report on controlled transactions, Notification of participation in an international group of companies: until 1 October 2022;
- Transfer pricing documentation (Local file) – submit at the request of the tax office within 30 calendar days from the date of receipt of the request;
- Global documentation (Master file) – submit at the request of the tax office within 90 days from the date of receipt of the request, but the tax authority has the right to request the master file no earlier than 12 and no later than 36 months from the end of the fiscal year; and
- Country-by-country (CbC) reporting: applied for the first time for the fiscal year ending in 2021, but not earlier than the year in which the competent authorities concluded a multilateral agreement on the automatic exchange of CbC reports.
Statute of limitations
The limitation period is usually 7 years. The statute of limitations had been suspended since 18 March 2020 due to the COVID-19 pandemic and was further suspended during the Martial Law period beginning 15 March 2022.
Transfer pricing audits
During martial law in Ukraine, tax audits are not started, and the audits that have started are stopped, except for certain exceptions.
The audits that have been completed, the deadlines for submitting objections to the act of audits and appeals against the received tax notification decisions were also suspended for the period of martial law in Ukraine.
The deadlines for inspections on compliance with the arm’s length principle have also been suspended.
2% tax rate for controlled transactions
Taxpayers could voluntarily change the taxation system from a general taxation regime to a unified tax regime at the rate of 2% of income during the martial law period. Taxpayers who used the special features of taxation will lose the right to use the features of such taxation and are automatically considered to be applying the taxation system they were in before choosing the specified taxation features.
When determining operations as controlled for 2022, the following approach will be used:
When the taxpayer’s income for controlled transactions is met the UAH150 million threshold, the annual income is calculated based on any activity for the entire reporting year, including income under the taxation system at the rate of 2%; and
When taxpayers’ income for controlled transactions is met the UAH10 million threshold the taxation system at the rate of 2% will not be taken into account, if they do not affect the object of taxation with the corporate income tax.
