The adoption of the Law “On Amendments to the Tax Code of Ukraine regarding transfer pricing” significantly changed the concept of the relationship between big business and the tax authorities.
The law expanded the definition of related parties and introduced the terminology of “controlled transactions”. These transactions include transactions exceeding an annual threshold of UAH 50 million and conducted with related parties or non-residents, that operate in jurisdictions with a nominal or effective Corporate Income Tax (CIT) rate that is at least 5 percentage points lower than the general CIT rate in Ukraine.
Starting with the reports on the results of the 2013 tax year, taxpayers must provide to the tax authorities detailed reports on controlled transactions to the extent that allow understanding the “seamy side” of pricing and structure of the group. Failure to submit the report or its incomplete submission is fraught with a fine up to 5% of the total amount of controlled transactions.
The tax authorities are given extensive powers to determine the adequacy of the mechanism for price determination to certain market “standards”. In particular, the tax authorities will be able to require the disclosure of the budgeting system, marketing policy, risk sharing, etc.
We offer a range of consulting, legal and auditing services, which allow effective, with minimal organizational and financial costs, adaptation of the pricing system to the increasing powers of the tax authorities.
In particular, we offer the following services:
– analysis of existing business models in order to identify the transactions that can be interpreted as controlled
– revision of the concept and structure of the transaction process through repartition of transactions between persons who are not related and are not in low-tax jurisdictions
– systemization and standardization of the established practice of pricing and discounting by developing and implementing internal policies and procedures
We believe that within the efficiently organized business, decisions on pricing are not accepted intuitively, but are always the result of the weighted market analysis, market research and understanding of the impact of market factors on price determination.
Our purpose is to provide our customers with capacious consultations with the aim of correcting the pricing system to avoid excessive reporting to the tax authorities, the additional expenses connected with tax administration and tax risks arising.
We have many years of successful experience in the development and practical implementation of pricing policies, marketing policies, regulations on provision of discounts and other similar regulatory documents.