The President of Ukraine signed the recently adopted law on transfer pricing (TP) which will affect both domestic and international corporations active in Ukraine. The following is introduced by the new TP rules:

  1. Where the new TP rules apply?

Under the law, the new TP rules apply to transactions which are known as controlled transactions (CTs).  CTs are transactions involving Ukrainian corporations where the total transactions’ amount per counterparty per annum equals or exceeds UAH 50m (about EUR 4.8m) provided that such transactions involve any of the parties mentioned below:

(i) a related non-resident party;

(ii) any non-resident counterparty which resides in a country where the corporate income tax (CIT) (or effective tax) rate is at least 5% lower than in Ukraine;

(iii) a related resident party which:

(a) has reported tax losses for the previous fiscal year;

(b) uses the special tax regime (e.g., pays a simplified tax, fixed agriculture tax or subject to special surcharge on electricity and thermal power tariffs, and special surcharge on natural gas tariffs);

(c) pays CIT and/or VAT at a non-regular tax rate (e.g. IT developers);

(d) is not registered as a CIT and/or VAT payer (e.g. private entrepreneurs, non-for-profit organisations and, arguably, for-profit organisations in certain cases).

  1. TP documentation

The new TP rules introduce a requirement of compulsory annual reporting by Ukrainian taxpayers on controlled transactions, which was not required before. The reporting period shall be a calendar year and the first report is to be filed with the tax authorities by 1 May 2014.

  1. Advance Pricing Agreements (APA)

New TP rules provide for an opportunity for large tax payers to enter into APAs with the tax authorities, which scope is wider than before and may include, in particular, an agreement on the list and types of goods and services to be controlled, on prices and/or methods, on the list of applicable data bases and on the allowed deviation from the established level of economic conditions, etc.

  1.  Safe harbours

There are safe harbours allowing 5% deviation in prices which are (at present) available only for certain industries (agribusiness, electric power, oil and gas-producing industry, mining, iron-working and chemical industries), though the Government is allowed to expand the safe harbours to other industries if it wishes to do so. The mentioned safe harbours are temporary and are expected to be valid until the end of 2017.

  1. Penalties

Failure to comply with the new TP reporting requirements may result in a 5% penalty of the aggregate amount of controlled operations. Large taxpayers may also be subject to a penalty of 100 official wages (about EUR 11.6K) for failure to timely submit additional documents per the request of the tax authorities.

It is expected that the new TP rules will become effective from 1 September 2013. This means that businesses which are active in Ukraine should take advance action to ensure compliance with the new TP rules.


The Law of Ukraine “On Amending of the Tax Code of Ukraine Regarding Transfer Pricing” dated 31 July 2013.