It should be reminded that this year during the evaluation of a controlled transaction, a special attention should be paid to the correspondence of such a transaction to the commercial and financial conditions of its conduction, prescribed in the contract. In particular, it is important to notice the definition and the functions analysis executed by the parties of the transaction, made on the basis of contracts concluded, accounting data, practical acts of the transaction parties and factual situation of their conduction according to the essence of the transaction. Practical aspects of controlled transactions execution are in the following.
Necessary actions
During the comparability of commercial and/or financial terms of the transactions with the terms of a controlled transaction, the characteristics of assets used by the parties in the controlled transaction, in particular, but not exclusively (para. 39.2.2.9м of the Tax Code of Ukraine, hereinafter – TCU), could also be taken into account:
- asset type (production equipment, intangible assets, financial assets, etc.);
- asset nature (year, market value, location, existence of the protective right, etc.).
Determination and analysis of the intangible assets influence upon the conditions of the controlled and comparable transactions are carried out with the taking into account, in particular, but not exclusively:
- legal possessions of the intangible assets and contractual conditions of their use;
- categories and characteristics of the intangible assets (exclusiveness, degree and duration of the legal defense, geographical area of use, term of useful life, development stage, etc.).
- parties contractual and factual activity related with development, improvement, support, defense and useful life of such assets.
At the same time, if factual conditions of executed controlled transaction do not comply with the conditions of the contract and/or actions of the transaction parties and factual situation of its carrying out differ from the conditions of such a contract, the commercial and/or financial characteristics of controlled transaction for transfer pricing purposes should be determined in accordance with the factual actions of the transaction parties and factual conditions of its conduction.
Absence of documentation
If the controlled transaction is factually carried out but is not documented (not confirmed), for transfer pricing purposes it should be considered according to the actual behavior of the transaction parties and factual conditions of its carrying out. In particular, it should be taken into account the functions that are factually executed by the transaction parties, assets that are factually used, and risks that are factually taken upon and controlled by each party.
Third parties and other important specifications
In addition, it was a specification of the rules of controlled transactions carrying out via the third parties. It was also specified that controlled transaction can be recognized including intra business calculation carried out between non-resident and his/her permanent representation in Ukraine.
