Recently, the State Tax Service (STS) has clarified the criteria for classifying transactions between related parties (Ukrainian residents and non-residents) as controlled for transfer pricing (TP) purposes.
Under Ukrainian transfer pricing rules, controlled transactions include if it is conducted with a non-resident related party; with an entity resident in a listed low-tax jurisdiction; through a non-resident commissionaire; or with a non-resident party that is exempt from corporate income tax.
According to the Tax Code, the above transactions are recognized as controlled only if the gross income of the taxpayer in the reporting period exceeds 150 million UAH; or the total of transactions with each counterparty in the reporting year exceeds UAH 10 million.
The STS also noted that if the non-resident acquired related party status during the tax year and then lost it, only those periods in a tax year that the non-resident was associated with the Ukraine-based company are taken into account to determine value of the controlled transactions according to article 39.2.1.7 of the Tax Code.
