Art. 39 of the Tax Code of Ukraine of 2 December 2010,№ 2755-VI as amended (hereinafter - TCU) provides a list of transactions, which can be controlled, as well as cost criteria (the amount of annual accounting income and annual amount of business transactions on counterparty) reaching which such transactions do become controlled.
According to paras.39.2.1.1 of TCU, controlled transactions are the following:
1. Business transactions that affect the subject to taxation of parties of such transactions carried out by taxpayers with related parties - non-residents;
2. Business transactions of foreign economic activity sector (hereinafter - FEA) on sale of goods through a commission agent - non-resident.
In accordance with paragraphs 39.2.1.2 of TCU, for the purposes of accruing of company income tax, controlled transactions are business transactions that affect the subject to taxation of a company, one of the parties is a non-resident registered in the country (in the territory), which is included in the list of countries (territories), approved by the Cabinet of Ministers of Ukraine (hereinafter - CMU).
Transactions with counterparty registered in the state (territory), included in the mentioned list, are to be recognized as controlled from the date of inclusion of such a country (territory) in the specified list.
It should be noted that in 2015 there were several lists of countries (territories) approved by the orders of the Cabinet of Ministers, namely:
- List of countries (territories), where the income tax rates (corporate tax) is by 5 and more percentage points lower than in Ukraine, approved by order of the Cabinet of Ministers of 25.12.2013, № 1042 (was in effect until 14.05.2015);
- List of countries (territories) that meet the criteria established by sub-paragraphs 39.2.1.2, subpara. 39.2.1 of para. 39.2. of Art. 39 of TCU approved by the order of CMU dated 14.05.2015, № 449-p (was in effect from 14.05.2015 to 16.09.2015);
- List of countries (territories) that meet the criteria established by sub-paragraphs 39.2.1.2, subpara. 39.2.1 of para. 39.2. of Art. 39 of TCU approved by the order of CMU dated 16.09.2015, № 977-р (is in effect from 14.05.2015).
In accordance with sub-paragraphs 39.2.1.5 of TCU, if in the chain of business transactions between the taxpayer and his/her related person - non-resident, provided for by sub-paras. 39.2.1.1 - 39.2.1.3 of TCU, ownership right of the subject of such a transaction before passing from the taxpayer to related person - non-resident (in case of export transactions), or before passing from related person - non-resident to the taxpayer (in case of import transactions) passes to one or several unrelated persons, such a transaction for taxation purposes of company income tax is considered to be a controlled transaction between the taxpayer and his/her related person - non-resident, if these unrelated persons:
- do not operate in such set of transactions essential functions related to the acquisition (sale) of goods (works, services) between related persons;
- do not use in such set of transactions significant assets and/or do not undertake substantial risks for organization of purchase (sale) of goods (works, services) between the related persons.
Business transactions, provided by sub-paras.39.2.1.1 - 39.2.1.3 and 39.2.1.5 of sub-para.39.2.1 of TCU, are to be recognized as controlled, if the following conditions are contemporaneously met (sub-para. 39.2.1.7 of TCU):
- annual income of the taxpayer from any activity, defined by accounting regulations, exceeds UAH 50 million (excluding indirect taxes) for the relevant tax (reporting) year;
- amount of business transactions of the taxpayer with each counterparty, defined by accounting regulations, exceeds UAH 5 million (excluding indirect taxes) for the relevant tax (reporting) year.
The reporting period is a calendar year for purposes of tax control over transfer pricing.
Business transactions for transfer pricing purposes are all types of transactions, agreements or arrangements, documented or unconfirmed, which may affect the taxable income of the taxpayer as well, although not exclusively:
- transactions with goods, such as raw materials, finished products etc .;
- transactions on services provision;
- transactions with intangible assets, such as royalties, licenses, fees for the use of patents, trademarks, know-how etc., as well as with any other intellectual property items;
- financial transactions, including leasing, participation in investments, credits, commission fee for a guarantee etc .;
- capital transactions, including the purchase or sale of shares or other investments, purchase or sale of long-term tangible and intangible assets.
Report of controlled transactions should be submitted on the first of May of the year following the reporting one.
