+ 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 proportionate TP adjustment rules introduced into Ukrainian tax law since May 2020

author: Ivan Shynkarenko

source: "WTS Transfer Pricing Newsletter, #2/2020"

06 October, 2020 Press

Ukrainian TP rules provided for a proportionate adjustment mechanism since 2013. It is defined as the right of a party in a controlled transaction to adjust its tax liabilities following a TP adjustment of the other party conducted to ensure that conditions of the transaction are at arm’s length.

Yet, until recent changes, the procedure of such adjustment was not clear. Namely, the Tax Code only mentioned that the proportionate adjustment should be carried out following the procedure and on conditions set forth by the applicable Double Tax Treaty (“DTT”).

Law 466-IX (in force since May 2020) introduced comprehensive changes into the Tax Code of Ukraine including the implementation of the Base Erosion and Profit Shifting (“BEPS”) three-tier reporting standard. Introduction of the rules detailing the procedure of proportionate TP adjustment is one of such important changes.

The right to initiate proportionate adjustment is available to the taxpayer who receives from its counterparty in a controlled transaction the notification about accomplished TP adjustment of tax liabilities in the country of its residence. Such a right is available only in the event that Ukraine has concluded DTT with the country of the counterparty.

Following such a notification, the taxpayer may apply to the tax authority informing about the intention to make a proportionate adjustment in the period or periods of the controlled transaction. The application should be accompanied with a calculation of the amount of adjustment for each period, other documents that formed the basis for the TP adjustment by the counterparty and also the TP documentation.

The tax authority has 30 workdays to consider the application and after this period adopts one of the following decisions:

  • to confirm possibility of such proportionate adjustment;
  • to disallow it in full or partially if it considers such adjustment to be unfounded or due to the absence of required documents. The tax authority must provide grounds for refusal;
  • to initiate a TP audit of the taxpayer to study the grounds for the proportionate adjustment and to adopt one of the aforementioned decisions based on the results of such audit.

In the case that the tax authority fully or partially disallows proportionate adjustment, the taxpayer has the right to apply to the Ministry of Finance to initiate consideration of the case according to the Mutual Agreement Procedure (“MAP”) according to applicable DTT.

In summary, since May 2020 Ukrainian taxpayers have the mechanism which may be followed to accomplish proportionate adjustment of its tax liabilities in the event of a TP adjustment of the counterparty in the transaction. In future it may prove to be an efficient tool for implementation of the group TP policy goals in transactions involving Ukrainian subsidiaries or to avoid double taxation triggered by one-sided TP adjustments.

Download pdf-file of the article (92 Kb)

Views 893


Finally! Ukraine has joined Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports 09 November, 2022    273

New decision of the Supreme Court of Ukraine regarding TP rules: new approaches to the application of the CUP method, but, unfortunately, questions still remain 05 October, 2022    504

Ukraine adopts new procedure on advance pricing agreements for transfer pricing purposes 19 November, 2021    501

Ukraine Ministry of Finance clarifies general tax consultation on deemed dividends 01 October, 2021    855

Ministry of Finance of Ukraine clarifies some TP issues 16 June, 2021    1478

Ukraine’s new transfer pricing rules expand taxpayer obligations 19 May, 2021    7858

Changes regarding form of the Report on controlled transactions and the Order of its filling 25 March, 2021    856

New rules on business purpose in Ukraine
Test introduced in 2020 has been revised with effect from 2021
09 March, 2021    1170

Country-by-Country Reporting: Form and procedure of submission 05 March, 2021    1699

Transfer Pricing reporting for 2020: what else you should know 19 February, 2021    1012

The Coca-Cola’s billion dollar loss in Transfer Pricing dispute with US tax authorities over royalties, or why taxpayers shouldn’t be overoptimistic about agreements with the state 17 February, 2021    1362

Thank you for not approving it on the 31th of December! The Cabinet of Ministers of Ukraine has approved a list of raw-material goods that fall under the TP scope 16 December, 2020    1637