All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Ukraine: Treaties and transfer pricing developments

kotenko.jpg

kalyta.jpg

Vladimir Kotenko


Iryna Kalyta

Ukraine signs a double tax treaty with Malta

On September 4 2013, Ukraine and Malta signed a double tax treaty. The treaty allows reducing withholding tax to 5% on dividends and to 10% on interest and royalties (conditions apply). The treaty will enter into force upon the exchange of ratification instruments and its provisions will apply from January 1 of the year following its entry into force.

New Ukrainian transfer pricing rules came into force

Starting September 1 2013, new transfer pricing rules finally became effective in Ukraine.

New regulations will apply to controlled transactions both for corporate profit tax and VAT purposes.

New transfer pricing rules introduced basic rules of functional and comparability analysis. Five methods, including comparable uncontrolled price, resale minus, cost plus, transactional net margin and profit split would be used for determining the arm's-length price for controlled transactions.

Controlled transactions for transfer pricing purposes will cover not only cross-border related party transactions, but also, in some cases, domestic related party transactions and even transactions with unrelated parties (for example located in low tax jurisdictions). The list of low tax jurisdictions will be adopted by the Ukrainian government. The annual threshold for controlled transactions is UAH50 million ($6.2 million).

An obligation to file transfer pricing reporting has been introduced. Transfer pricing documentation will have to be provided at the request of the tax authority. The first reporting period covers September to December 2013, and the first transfer pricing report is due by May 2014. Failure to report or to provide documentation will attract a prohibitive fine of 5% of the value of controlled transactions.

There will be a grace period on penalties for violation of transfer pricing rules from September 2013 to September 2014, but this grace period will not apply to penalties for failure to file the report or to provide documentation.

Although introduction of these more extensive transfer pricing rules is viewed as a positive development aimed at bringing Ukraine closer to OECD principles, many important matters are yet to be resolved. The government is expected to adopt secondary regulations explaining the new rules.

Vladimir Kotenko (vladimir.kotenko@ua.ey.com) and Iryna Kalyta (iryna.kalyta@ua.ey.com)

EY

Tel: +380 44 490 3000

Fax: +380 44 490 3030

Website: www.ey.com/ua

more across site & bottom lb ros

More from across our site

This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree