+ Word must be in search result. - Words must not be in search result. * Word start/end on characters before/after symbol. ""Words in quotes will be searched as phrase.


New Draft Law on BEPS implementation

author: Ivan Shynkarenko

source: "WTS Transfer Pricing Newsletter #3/2017"

19 December, 2017 Press

In September this year the working group, led by the Ministry of Finance of Ukraine and the State Fiscal Services, has finished elaboration of the new draft Law aimed at implementation of TP-related Actions of BEPS into Ukrainian tax law.

The most important changes are as follows.

The draft Law adopts a three-tier approach to transfer pricing documentation according to Action 13 of BEPS. Namely, TP documentation shall consist of (i) master file, (ii) local file and (iii) Country-by-Country (CbC) report.

Suggested amendments are generally in line with basic BEPS recommendations. Yet, there are also some differences. For instance, although it envisages general the BEPS compliant threshold of EUR 750 million for submitting of CbC Report, there are also specific rules designed for MNCs of Ukrainian origin.

Namely, MNCs with the annual consolidated group revenue equal or exceeding EUR 50 million would be obliged to file CbC Report in Ukraine if one of the following conditions is met:

  • the beneficial owner of the parent company of the international group of companies is a resident or a citizen of Ukraine;
  • ≥ 50 % of shares in international group of companies belong to residents or citizens of Ukraine;
  • ≥ 50 % of the total number of employees of all companies of the group at the end of the reporting period are employed in Ukraine;
  • ≥ 50% of the total balance sheet value of fixed assets of all group companies at the end of the reporting period are actually located in Ukraine;
  • ≥ 50% of consolidated income of the international group of companies is the income from sales of goods (works, services) which country of origin is Ukraine;
  • if the parent company of international group of companies is registered in an offshore zone, included in the list, which is approved by the Cabinet of Ministers of Ukraine, and such company did not submit a CbC Report or this report was submitted in the country which has not concluded agreement on exchange of information with Ukraine.

The draft Law also provides special provisions on possibility to submit simplified TP documentation for low value-added intra-group services. This is the new provision not currently established in the Tax Code of Ukraine. The Action 10 of BEPS is the basis for provisions of the draft Law in part of such services.

An important novelty is introduction of the principle of business purpose of transactions. Namely, taxpayers will be obliged to prove in TP documentation that controlled transactions have clear business purpose, which is actually the benefit-test.

According to the draft Law, the controlled transactions are deemed to have a reasonable business purpose in case if under comparable circumstances an independent person would be ready to buy the same services or goods from other independent person in order to obtain the same benefits or would be ready to pay the same value of the services or goods. Otherwise (i.e. in the absence of business purpose of controlled transaction) the value of such controlled transaction shall be considered to be a zero.

The abovementioned novelty is going to make tax payers feel themselves in vulnerable position. Thus, the draft Law does not provide for the definite list of possible evidences of business purpose of transactions. At the same time, the controlling authority is entitled to disregard for tax purposes the results of controlled transactions, which they believe not to have “business purpose”.

Download pdf-file of WTS Transfer Pricing Newsletter #3/2017 (290 Kb)

Views 543


Global Trend: Operations with Raw Materials and Traditional Hard Industrial Products as a target of TP 20 November, 2018    475

Parallel Import: Hidden Tax Risks for Official Importers in the context of Transfer Pricing rules 24 October, 2018    1267

The spirit of the international community of TP professionals

Impressions of participation in the Global Transfer Pricing Forum in Munich under the auspices of the International Tax Review
17 October, 2018    890

WTS Global Country TP Guide:
A comprehensive survey on Transfer Pricing from 73 countries
12 October, 2018    1197

Bulgaria is excluded from the list of “low tax” jurisdictions for TP purposes 27 April, 2018    2754

Transfer Pricing penalties: is it OK to apply penalty for the late submission of the report on controlled transactions for the period before January 01, 2017? 26 April, 2018    537

Transfer pricing penalties: general overview 12 March, 2018    33077

The list of “low-tax” jurisdictions, adopted by the Cabinet of Ministers of Ukraine for transfer pricing purposes, was amended 07 March, 2018    3504

TP disputes: what we can understand from the first dispute in Ukraine that concerns application of the net margin method 23 February, 2018    865

Special rules concerning the permanent establishment of non-residents in TP changes from January 01, 2018. What to prepare for? 06 February, 2018    1374

30 % adjustment under subpara. 140.5.4 of the Tax Code of Ukraine from now on will cover one more kind of transactions. What do we think about practical application of new rules? 22 January, 2018    1290

The list of legal forms of non-residents who do not pay income tax (corporate tax), including tax on income received outside the state of such non-residents’ registration, and /or are not tax residents of the state in which they are registered as legal entities 22 January, 2018    4896