by Eric J. Lyman
ROME—The Ukrainian parliament passed the country's first-ever transfer pricing law
July 4, setting the stage for it to go into effect Sept. 1.
Viktor Yanukovych, Ukraine's president, must still sign the legislation before it can
officially become law. But that step is considered nearly perfunctory, since it was
Yanukovych's allies in the Verkhovna Rada—Ukraine's parliament—that pushed for
the measure to be adopted.
Passage comes after several procedural delays. An earlier version had been
expected to be passed nearly two years ago, and an earlier version of the final
legislation had been expected to be approved by the Verkhovna Rada in time
for it to go into effect by July 1 (21 Transfer Pricing Report 1068, 3/7/13).
Still, the measure is expected to make the Ukraine a more attractive
destination for investments from multinational companies: the Ukrainian
Ministry of Income and Tax said earlier this year passage would attract as
much as 20 billion Ukranian Hryvna ($2.5 billion) in new investments in the
first three years after passage without increasing the verall tax burden.
“It is not exactly based on the OECD guidelines, but it is very close,” said
Slava Vlasov, a partner with PricewaterhouseCoopers in Kiev, referring to the
Paris-based Organization for Economic Cooperation and Development. “There
is no doubt that most of the benefits from this law are intangible in that it will
significantly simplify the process of doing business in Ukraine from a tax perspective.”
The central part of the law will apply for all transactions involving residents of countries where the
corporate tax rate is at least 5 percentage points lower than in Ukraine and that meet the criteria of the
The Ukraine corporate tax rate is 13 percent now, and will be lowered to 11 percent next year. Sources
working in the Verkhovna Rada during the passage told BNA that debate centered around two key areas:
Businesses had been pushing for the higher threshold, but in the end the 50-million level was adopted.
The monitoring requirement was also adopted, but only in cases where one of the parties has reported a
tax loss or uses a special tax regime.
According to PricewaterhouseCoopers, the law also provides for high penalties—of up to 5 percent of a
transaction amount—if a report is not filed (but not for errors in a report).
According to Vlasov, the law is likely to see changes in the future only where it applies to “consolidated
groups of tax payers.” He said a future amendment to the law could eventually treat such groups as single
taxpayers, making it more likely that transactions related to the group would reach the minimum thresholds.
The final vote was 321 in favor of the measure and 226 against.
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