On 1. September Ukraine entered into force new transfer pricing regulations, which are essentially quite similar to OECD guidelines and therefore it can be assumed that the Ukrainian transfer pricing policy is now looking towards regulations developed by the OECD.
However, there are still some differences between Ukraine and OECD transfer pricing concept, but despite that, Ukrainian regulations are quite similar to the existing rules which are used in many countries.
While analyzing Ukrainian transfer pricing regulations, it is important to pay attention to the fact that in addition to the transactions between related parties, transfer pricing rules also apply to transactions between unrelated parties if they are made with non-residents from low-tax countries. In transfer pricing regulation we are talking about low-tax countries when the enterprise income tax rate is 5% lower than in Ukraine (in 2013 it is 19% and in 2014 it is 16%). A complete list of low-tax countries is prepared by Government of Ukraine.
According to the transfer pricing regulation transactions which exceeds the annual threshold 50 million UAH (per one counterparty) qualify as controlled transactions. Taxpayer has right to use five methods to control the transactions – comparable uncontrolled price method (CUP), resale price method (RPM), cost-plus method (CPLM), profit-split method (PSM) and transactional net margin method (TNMM). Also, current 20% „safe harbor” rule is replaced with the „arm´s length price” concept.
Until 2018 some businesses have right to use simplified transfer pricing rules. First of all it concerns the exporters and importers of certain goods (oil, gas, chemicals, metals) whose partners are in countries with low tax rates. According to the simplified rules, the price of goods must be calculated on the basis of information obtained from sources approved by government and companies are allowed to have 5% variation.
While preparing documentation the big companies has obligation to submit documentation annually – the deadline is 1. May. On the other hand, small businesses must be ready to provide documentation when Tax Authorities request it. It is also required that supporting evidence – such as invoices, contracts, bank statements etc – are attached to the documentation.
|Ukraine Transfer Pricing Rules|
|1. Minimum requirements||
|2. Deadlines and files submission||
|3. Minimum content of Master/Local Documentation File||
|4. Specific requirements on certain type of transactions||