#09 September 2015

In focus – Transfer Pricing

Worldwide interest in the issue of transfer pricing (TP) is determined by unbelievable estimates of tax revenue losses. Different sources assume that up to 60% of international trade occurs within the same corporate groups. The big multinationals faced a sophisticated challenge to ensure compliance with transfer pricing rules across the globe, while advisers are required to offer clients up-to-date solutions in enforcing their pricing strategies...

Expert Opinion

Transfer Pricing 2015: Adaptation to Changes

Larysa V. Vrublevska

The current system of transfer pricing regulation in Ukraine is still being improved. The latest amendments to tax legislation introduced by the Act of 15 July 2015, No. 609-VIII that came into effect on 13 August 2015. Generally, with the help of the abovementioned Act several tasks have been completed. Namely, the drawbacks of the previous wording of Article 39 of the Tax Code of Ukraine are eliminated (for example, financial ratios list needed for the profitability calculation is brought back), and the new wording of some basic norms, including those regulating the definition of the controlled transactions, is presented. All amendments can be defined as quite liberal toward taxpayers. Although some fiscal details such as tripling of the penalty for the failure to submit reports are not avoided...

In Re

Comparable Uncontrolled Price Method

Ivan V. Shynkarenko, Kateryna V. Utiralova

From 1 January 2015, new version of Article 39 sets out the revised transfer pricing control system. On 7 July 2015, the Verkhovna Rada of Ukraine adopted other amendments of this Article and they have already been signed by President Petro Poroshenko.

Article 39 contains probably the most heavily amended rules of the Tax Code. At the same time, one rule that remains unchanged is the priority of the comparable uncontrolled price (CUP) method over other methods of transfer pricing...

Transfer Pricing Report and Documentation: the Reason for Being on Alert

Yuliia N. Lavrekha

Business within Ukraine is challenging not only due to political and economic struggles, but also because of continuous changes in business regulation rules. Transfer pricing is one of the most crucial and unexpected issues.

Being a pre-stage for assessment of transfer pricing risk by the tax authorities, the transfer pricing report and documentation are very important for taxpayers. The contents of the documentation are the key factor for making a decision whether to launch a full audit of controlled transactions...

Deals

DEALS:

Asters — legal counsel to Primestar Energy FZE

Sayenko Kharenko — legal advisor to Ukreximbank

Dentons advised Turkcell on acquisition of Astelit

Baker & McKenzie advised EBRD

AEQUO advised Ukrainian Business Group

Cases

CASES:

Roshen tries to protect Vanilla Sky brand

Zeonbud sued Tonis for UAH 20 million

Draft

DRAFT:

Reduction in licensing procedures for foreign trade

Environmental impact assessment

Accounting and financial reporting improvement

Enforcement of judgments

Law Digest

LAW DIGEST:

Taxpayer burden reduction

E-money

Rent ceiling for land plots

VAT administration

UBA News

Ukrainian Bar Association

UBA Competition Committee Round Table

UBA Agrarian Law Committee Round Table

Biznews

BIZNEWS:

Banking & Finance

Ukraine gets USD 732 million for housing and communal services sector

Government approved World Bank loan terms and conditions

Trade Policy

Ukrainian exports to Russia fell to historic low

Support to European fruit and vegetable producers

Mergers & Acquisitions

Clearance for acquisition of Thorntons by Ferrero

European Commission approves conditional acquisition of Hospira by Pfizer

Cover Story

Tricky Tasks

In its attempts to prevent capital outflow from the country, the Ukrainian Parliament has adopted and already amended transfer pricing regulations. Business decision-makers should take this into account in their development strategies just as their external advisors receive the tricky task of combining legal, financial, accounting and economic knowledge. Ivan Shynkarenko, Ph.D. in Economics and partner at WTS Consulting LLC, shared his views on the recent challenges imposed by transfer pricing law, its revealed pitfalls and future prospects.

Argument

Terra Incognita, or Special Sanctions under Ukrainian Law

Anzhela M. Makhinova, Ivan Y. Baranenko

Each country is willing to protect the established legal order in particular in the sphere of foreign trade and obviously has its own toolbox for this purpose. Ukraine is no exception. Ukrainian law stipulates quite strict special sanctions to be applied for violation of different foreign trade regulations. The aim of this article is to throw light on the application of special sanctions in Ukraine...

Global Legal Update

Safe Harbors in Transfer Pricing Regulations

Olena V. Voznyuk

Anumber of countries have already adopted Transfer Pricing (TP) rules and are continually increasing their TP compliance requirements. Ukraine joined the list in 2013. Although TP rules in most countries are in line with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines), many countries have unique TP rules and TP documentation requirements. In order to simplify compliance requirements and reduce the number of TP audits and disputes, the OECD has announced an initiative to simplify and harmonize the TP requirements, and the “safe harbor” regime was among such initiatives...

Crux

Lawmaking under the Microscope

The recent open report by the Government declared many already adopted changes and anticipated ones. The laws submitted by the Cabinet of Ministers are asked to be considered and supported by the Ukrainian Parliament. Meanwhile, by way of tradition we ask lawyers to impose critical views on lawmaking activity.

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