{"id":547,"date":"2013-08-06T07:04:38","date_gmt":"2013-08-06T05:04:38","guid":{"rendered":"https:\/\/kmp.ua\/?p=547"},"modified":"2018-02-15T16:36:33","modified_gmt":"2018-02-15T14:36:33","slug":"nyzka-vidsotkova-stavka","status":"publish","type":"post","link":"https:\/\/kmp.ua\/en\/analytics\/infoletters\/nyzka-vidsotkova-stavka\/","title":{"rendered":"Which states would be considered as states with low tax rate for the purposes of the Law on Transfer Pricing?"},"content":{"rendered":"

Updated on December 6, 2013<\/span><\/em><\/span><\/p>\n

The rules of determination of countries, which fall under the category of the states with low tax rate for the purpose of transfer pricing, experienced transformation with entering into force of the respective provisions of the Law of Ukraine of 24.10.13 No 657-VII “On introduction of amendments to the Tax Code of Ukraine regarding taxpayers\u2019 registration and improvement of some provisions”.<\/p>\n

In particular, according to the Final provisions of the Law, paragraph 5 of the Law on amendments in Article 39 of the Tax Code of Ukraine (hereinafter the “TC of Ukraine”) enters into force on the next day following its publication. In the official edition of \u201cHolos Ukrainy\u201d the respective Law was published on 12.11.2013, which gives grounds for application of the respective amendments since 13.11.2013.<\/p>\n

Thus, the provisions of para. 39.2.1.2 of Article 39 of the TC of Ukraine currently imply that the controlled transactions for purposes of transfer pricing are “transactions, where one of the parties is non-resident, registered in the state (territory), where corporate income tax rate (corporate tax) is by 5 and more percentage points lower, than in Ukraine, or which pays corporate profit tax (corporate tax) under the rate by 5 and more percentage points lower, than in Ukraine”<\/span>.<\/span><\/span><\/p>\n

It means that henceforth controlled transactions include, among other things, business transactions with non-residents who are not considered to be related parties, but registered in the states, where corporate income tax rate is by 5<\/em> percentage points<\/em> and more lower than in Ukraine. Let us remind that previously the legislator has determined such differentiation as 5 percent<\/em> or more.<\/p>\n

At the same time, the only substitution of the word “<\/em>percent<\/span>\u201d<\/em> with the phrase \u201cpercentage points<\/span>\u201d<\/em> influences the taxation significantly.<\/p>\n

By 5 percentage points and more \u2013 what does it mean?<\/em><\/p>\n

Firstly we would like to differentiate between the notions \u201cpercent\u201d and \u201cpercentage points\u201d. Thus, by usage of the notion \u201cpercent\u201d of a certain number, one means \u201ca hundredth part of this number\u201d. Such definition gives us the Ukrainian Wikipedia, and herewith explains that:<\/p>\n

\u201cWhen one refers to \u201can increase by 10%\u201d or \u201cdecrease by 20%\u201d it is assumed that the change is compared with the previous value.<\/span><\/p>\n

\u2026<\/span><\/p>\n