New Ukrainian tax laws mean significant changes for multinationals

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October 2020

Overview

New Ukrainian laws (Law 466) introducing significant international tax and transfer pricing changes, mostly implementing BEPS initiatives, enter into force January 1, 2021.  However, many of Law 466’s provisions became effective May 23, 2020.

The takeaway

The new laws contain a variety of new concepts, terms, and obligations affecting Ukrainian businesses and multinational companies.  Existing financing or corporate structures may appear inefficient under the new rules.  Further analysis to understand the impact of these laws is advisable as noncompliance might result in material fines for businesses.

Multinationals doing business in Ukraine should consider immediately adopting new measures intended to achieve compliance while maintaining efficiency in their business.  Steps to consider include: 

  • assessing current corporate structures as to whether they comply with the new tax laws and remain efficient
  • identifying group activities that potentially may create taxable presence in Ukraine (either through a PE or PoEM) and taking possible mitigation measures
  • evaluating whether all transactions have a business purpose (i.e., aim to receive certain economic benefits)
  • assessing whether the group can enjoy tax treaty benefits under the new rules and preparing a defense file, if needed
  • identifying whether there is any Ukrainian controlling person in the group (either an individual, tax resident of Ukraine, or a Ukrainian legal entity) and whether there are any CFCs subject to reporting and taxation in Ukraine at the level of such a controlling person, assessing related tax implications, and assisting in seeking compliance
  • developing commodities TP policy, as well as policies corresponding with the arm's-length principle to calculate the PE’s income.

Contact us

Bernard Moens

US Inbound International Tax Services Leader, PwC US

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