Tax Management Transfer Pricing Report, Vol. 21 No. 17, 1/10/2013
Slava Vlasov, Partner, Tax and Legal services
The debate on Ukraine’s first-ever transfer
pricing law could face a new set of delays after a
government shake-up in late December cast some
uncertainty over the parliament’s plans, according to a
The Verkhovna Rada—Ukraine’s parliament—had
been scheduled to take up the issue when its first session
of 2013 opened Jan. 10. But President Viktor Yanukovych
dismissed and reassigned several ministers Dec.
24, making the immediate fate of the transfer pricing
legislation unclear, although indications are that it still
will be voted on in time to go into effect either July 1,
2013, or Jan. 1, 2014. It would have to be approved over
the first three months of the year to take effect by the
The legislation, a first in Ukraine, was presented to
Ukrainian business leaders in mid-2012, with an eye toward
implementation by Jan. 1, 2013, but the process
was delayed for technical reasons. At that point, the
government called on PricewaterhouseCoopers for help
in overcoming the obstacles, then again sought input
from businesses with a goal of having the legislation
take effect in July 2013 or January 2014.
The latest set of delays is political, according to one
member of the parliament. ‘‘The government is seeking
to make sure that key decisions are made by those closest
to President Yanukovych and this change could create
delays for some kinds of legislation,’’ Mykola
Tomenko, a member of the Verkhovna Rada, told BNA.
Threshold for Automatic Investigation. Lawmakers said
there is little opposition to establishing a transfer pricing
regime in Ukraine, but Slava Vlasov, PwC’s lead
partner on the transfer pricing project, told BNA there
will be debate on some aspects of the law: most notably,
a provision that would set a threshold of either 50 million
($6.2 million) or 100 million ($12.4 million) Ukranian
Hryvna as the amount of total transactions that
would trigger an automatic investigation.
Businesses have been pushing for the higher threshold.
‘‘The final law will be in line with best European
practices and [Organization for Economic Cooperation
and Development] transfer pricing guidelines, but some
of the specifics, such as the thresholds, will be the result
of an eventual compromise between business and
tax authorities,’’ Vlasov said.
Under the terms of the draft, transactions between
subsidiaries of the same parent company doing at least
some of their business in Ukraine will be monitored if
the annual sum of the transactions in question meets
the threshold, although the State Tax Service of
Ukraine retains the right to look into any transactions,
even those not meeting the agreed threshold.
Companies will be required to submit a report on
flagged transactions every year by May 1, including detailed
information about the transactions in question,
counterparties, risk analysis, and the justification of the
price level used. If a company fails to report a transaction
accurately, it can be fined up to 5 percent of the
value of the transaction in question.
The draft also allows for inspections from the State
Tax Service of Ukraine, including new powers for tax
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