On 16 January 2020, the Ukrainian Parliament approved draft laws on the improvement of the administration of taxes and elimination of certain inconsistencies in tax legislation (Law No 1209-1 and Law No 1210) to implement the Base Erosion and Profit Shifting (BEPS) action plan. The following important changes were introduced related to BEPS provisions:

• Three-tiered TP documentation was introduced to multinational enterprises (MNE) present in Ukraine consisting of master file (MF), local file (LF) and country-by-country (CbC) report in accordance with BEPS action 13. Proposed revenue thresholds are EUR 50 million for master files and EUR 750 million for CbC reports in line with OECD.
• The definition of related parties is revised, with ownership of the shareholder requirements increased from 20% to 25%, which is also in line with the international approach.
• The new rule would apply to transactions with related and unrelated persons if the debt is greater than 3.5 times the company’s equity. Thin capitalization rules will no longer apply to lease companies and financial institutions. Interest deduction limitation has been reduced to 30% of earnings before interest, taxes, depreciation, and amortization (EBITDA), which was previously 50%.
• The policy for substantiation of controlled transactions with commodities is improved. In addition to international commodities exchanges recommended by the Cabinet of Ministers of Ukraine, taxpayers shall be entitled to refer to other publicly available sources (e.g., information agencies), internal comparable transactions and comparable transactions of the counterparty in a controlled transaction.
• Implementation of the 8-10 steps of the BEPS plan to control the distribution of functions, risks, and intangible assets within a group of companies, improve the rules for commodity transactions by eliminating the restriction on the use of stock quotes of certain exchanges and allowing the use of quotations for such commodities.
• The draft laws also include measures relating to the Mutual Agreement Procedure (MAP) and also extended the definition of the dividend.

According to the text of the draft laws, the measures enter into force on the day following its publication, except for certain provisions. The draft laws now await the President’s approval and will be enacted into law after publication in the official gazette.