From January 1, 2018, the Law of Ukraine of December 7, 2017, No. 2245-VIII "On Amendments to the Tax Code of Ukraine and certain legislative acts of Ukraine on balancing budget revenues in 2018" came into force. Below you will find the key information about transfer pricing rules in 2018 and their impact on Ukrainian business.

We help companies reduce the risks associated with transfer pricing by providing the following services:

• preparation of transfer pricing documentation;

• filling a Report on controlled transactions;

• development of transfer pricing policy;

• conclusion of a pricing agreement with the Ukrainian tax authorities.

Currently such business transactions carried out by Ukrainian taxpayers are considered to be controlled:

• transactions with related non-resident parties;

• foreign economic operations for the sale of goods through non-resident commission agents, transactions with non-residents (both with related and unrelated entities) registered in the jurisdiction included in the list, which is published by the Cabinet of Ministers of Ukraine, in particular:
  • in a state (on a territory) where the tax rate is by 5 or more percentage points lower than in Ukraine;
  • in a state that does not disclose information on the ownership structure of legal entities to the public;
  • in a state that Ukraine has not signed international agreements with provisions on the exchange of information with.
• transactions with non-residents which organizational legal form is specified in the list published by the Cabinet of Ministers of Ukraine;
• transactions between non-resident and its permanent representative office in Ukraine.

Such transactions are considered to be controlled if the following conditions are met at the same time:

• the taxpayer’s annual income from any activity defined by accounting rules is more than 150 million UAH (excluding indirect taxes) for the relevant taxation (fiscal) year;

• the amount of such taxpayer's transactions with each counterparty defined by accounting rules is more than 50 million UAH (excluding indirect taxes) for the relevant taxation (fiscal) year and calculated at "arm's length" prices.

Ukrainian taxpayers who carried out controlled transactions are required to:

• prepare and submit a Report on controlled transactions before October 1 of the year following the taxation (fiscal) year;

• prepare and keep transfer pricing documentation on separate controlled transactions and provide it upon request of the tax authorities of Ukraine.

What are the consequences of violating the transfer pricing rules?

• Failure to submit a report on controlled transactions by October 1 results in a fine in the amount of 300 monthly minimum subsistence (528,600 UAH in 2018);

• Undeclared controlled transactions in the Report on controlled transactions result in a fine of 1% of the controlled transaction amount (but not more than 300 monthly minimum subsistence for all undeclared controlled transactions);

• Failure to submit transfer pricing documentation entails a fine of 3% of the controlled transaction amount (but not more than 200 monthly minimum subsistence for all undeclared controlled transactions).

How can KPMG help you stay one step ahead in the field of transfer pricing?

In the process of controlled transactions analysis KPMG specialists use a comprehensive approach to transfer pricing issues, taking into account the current legislation, expected amendments to it and international transfer pricing principles. This approach helps our clients comply with the laws and regulations and creates additional business value.

Our experts offer their help in the following:

• development of intra-group transfer pricing policy;

• preparation of transfer pricing documentation;

• assessment and reduction of tax risks; 
• maximizing management and administrative expenses for accounting and income redistribution within the group;

• carrying out benchmarking studies to determine the market price;

• negotiating with tax authorities about the signing of the pricing agreements.

KPMG professionals help our clients in the structuring of intra-group transactions in Ukraine and abroad, analysis of tax risks related to the application of transfer prices, and transfer prices rationale from the tax point of view.

Our transfer pricing specialists actively cooperate with other KPMG specialists in the field of corporate tax, consulting and legal services. KPMG professionals use KPMG’s global experience in transfer pricing, cooperating with their colleagues from the KPMG Global Transfer Pricing Practice.