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“Massive” requests regarding application of the 30% adjustment on corporate income tax. What is wrong and what to do?

authors: Alexander Minin, Ivan Shynkarenko

03 August, 2023 Exclusive

The rule on 30% adjustment to the amount of the value of goods (works, services) purchased from non-residents from the lists of the Cabinet of Ministers of Ukraine has been provided for in paragraph 140.5.4 of the Tax Code of Ukraine since 2015.

Law 466-IX, which entered into force on May 23, 2020, added to the Tax Code of Ukraine the provision 140.5.5-1 that extended 30% adjustment of the financial result to transactions for the sale of goods (works, services).

In essence, such provisions extend the requirement to justify the compliance with the "arm's length" principle to transactions with non-residents from the lists of the Cabinet of Ministers, both with related and unrelated parties.

At the same time, provisions regarding 30% adjustment and the practice of their application do not correspond to the primary purpose of their introduction as they put hardly justifiable burden on a significant number of taxpayers, as well as the burden on tax authorities in terms of tax administration.

In addition, these provisions do not correspond to the general principles of taxation, in particular the principles of economic efficiency and neutrality.

The best solution is to abolish these provisions or at least significantly transform them.

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