Analytics

Ukrainian government aims at a serious overhaul of Ukrainian TP regulations with the evident aim to tighten the screws on taxpayers

18 May, 2026 Newsletters

On February 24, 2026, the Ministry of Finance published for public consultations the draft law implying changes to the Tax Code aimed at “further improvement of the transfer pricing rules”, as its name declares.

According to the Ministry, the draft law was developed with assistance from the OECD and State Tax Service of Ukraine, aiming at protection of tax base, decrease in the number of disputes and risks of double taxation, alignment with OECD and EU standards.

The draft law is a 56-pages long document that implies a significant overhaul of Ukrainian transfer pricing (TP) rules. The nature of the changes evidences the prominent role of the fiscal authority in its development, as its adoption would mean significant complication of the rules for taxpayers and a sharp rise in TP adjustment penalties.

Key changes are as follows:

The draft law implies review of the thresholds triggering TP control in Ukraine. Currently, TP control is triggered in case two criteria are met: (i) total annual revenue of a taxpayer exceeds UAH 150 million (around EUR 3 million) and (ii) turnover with a counterparty exceeds UAH 10 million (around EUR 200 thousand). The draft law abolishes the second criterion, which would entail less legal clarity for minor intercompany transactions being outside TP control as of now.
TP rules would cover certain local Ukrainian transactions, namely transactions with loss-making companies or entities enjoying tax preferences. This rule may significantly increase the sphere of domestic TP control, as losses are widespread in some sectors of the Ukrainian war-torn economy.
TP control over permanent establishments is further expanded. It brings permanent establishment’s transactions with other related parties and permanent establishments under such control. Besides, TP control is extended to transactions of permanent establishments of Ukrainian entities abroad, as currently only permanent establishments of foreign companies in Ukraine are solely targeted.
The draft law adopts the OECD TP Guidelines 2022 in the provisions describing the steps for identification of transactions, functional analysis and application of TP methods, with a particular focus on the necessity of an evidence-based approach in making important choices and conclusions while setting prices and conducting TP analysis.
Mandatory analysis of possible synergetic effects and their impact on value creation.
Further elaboration of TP rules for transactions with intangibles, including mandatory DEMPE analysis.
Another novelty in the draft law is a notion of “shortened” TP documentation (a Ukrainian analogue to the Local file) which is presented as an improvement for taxpayers. Yet, requirements to the content of such a documentation and the limited scope of application make this simplification barely noticeable.
The most crucial change is related to the materiality of the consequences in case TP adjustments are made by tax authorities. Notably, a new category of penalties for adjustment of the object of taxation, covering TP adjustments, is introduced. These penalties are calculated from the amount of adjustment of a tax base (rather than an amount of tax as currently the case) and may amount to 30% of the adjustment in case of “aggravating” circumstances, which constitutes a dramatic increase of the penalties up from the current maximum penalty applied to the amount of assessed tax rather than adjustment of a tax base as proposed by the draft law. According to the draft law, such aggravating circumstances may include foundational choices within the TP analysis (TP methods, choice of the tested party, etc.) should tax authorities disagree with them.
To further tighten the screws on taxpayers, the draft law also introduces changes to the application of market ranges during TP audit. Thus, in case tax authorities discovers the “aggravating” circumstances, the TP adjustment is calculated based on the point of a market range of prices or profitability which is the most disadvantageous for a taxpayer. In combination with the new penalties, such a rule would make any errors in the TP analysis potentially fatal for taxpayers.

To conclude, the draft law provides for a significant overhaul of TP regulations in Ukraine. The direction of such an overhaul may hardly be called an improvement, at least for taxpayers. The aim of the draft law is clearly at intensifying pressure on taxpayers and collecting further taxes by means of TP adjustment.

The aim is understandable given the situation in Ukraine. Yet, the draft law in the current form is clearly rigged in favor of tax authorities and thus creates serious risks of unlawful pressure on businesses struggling to survive during the fifth year of the war. Therefore, one may expect that the draft law will be subject to serious changes following public consultations.

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.

Kind regards,

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