On 22 February 2024, the State Tax Service of Ukraine published a release about the outcome of the transfer pricing adjustments in 2023. The release mentioned that from 1 August 2023 until the conclusion of martial law in Ukraine, taxpayers can rectify errors that resulted in the underreporting of tax obligations without penalties.
State Tax Service of Ukraine informs that more than 400 taxpayers made price adjustments of controlled operations and amounts of tax liabilities during 2023, as a result of which they voluntarily increased financial results before taxation by 6.9 billion UAH, which led to accrual of income tax in the amount of 0.6 billion UAH and reduction of negative value of taxation object in the amount of 3.7 billion UAH.
The biggest number of adjustments were made by taxpayers operating in such industries as chemical and pharmaceutical (32%), machine-building (17%), agro-industry (10.5%), food (6%), financial and banking (4.1%) and fuel (2.5%).
Main countries of registration of non-resident counterparties, in respect of which price adjustments were made of controlled operations and amounts of tax liabilities, are the Swiss Confederation (19%), United Arab Emirates (14%), Federal Republic of Germany (9%) and Republic of Cyprus (6%).
Therefore, every 6th taxpayer who submitted report on controlled operations made independent adjustment of tax liabilities during 2023. In addition, it is worth noting that the above-specified amount of adjustments is greater than the average annual figure by 2.7 billion UAH.
Such result is a consequence of systematic work of controlling bodies and indicates increase in level of tax culture. More than 55% of the total amount of adjustments made by taxpayers who received requests to submit information according to Paragraph 73.3 Article 73 of the Tax Code of Ukraine (hereinafter – Code) and documentation (additional information) on the transfer pricing.
Also, developed procedures for establishing compliance with conditions of controlled operations for raw materials with the “arm’s length” principle had a significant influence on formation of taxpayers’ position (Order of the Ministry of Finance of Ukraine № 19 as of 18.01.2022).
Application of methodology and approaches defined by regulations made it possible for taxpayers (exporters/importers of raw materials) to review calculations of the taxable profit amount according to the “arm’s length” principle and to independently adjust tax liabilities based on results of a review of prices of controlled operations and amounts of tax liabilities before the start of audits on the transfer pricing matters.
In this regard, the State Tax Service recommends taxpayers to review conducted controlled operations, both during 2023 and previous reporting periods, regarding their compliance with the “arm’s length” principle, and take advantage of the opportunity to calculate tax liabilities according to the minimum or maximum values of price/profitability ranges (depending on the research party) and submit clarifying calculations without application of financial sanctions and penalty.
