The Ukrainian legislation for transfer pricing came into force in 2013, with implementation of respective amendments to the Tax Code of Ukraine ("CCU"). However, at present the transfer pricing rules (provided for the CCU) are not applied accurately.
In light of the above, in order to clarify the transfer pricing rules, the Cabinet of Ministers of Ukraine has issued Ordinance No. 449-P dated 14 May 2015 ("Ordinance No. 449") that updated the list of the countries (territories) falling under the transfer pricing control during cross-border operations ("List"). Please note Ordinance No. 449 entered into force on the date of its adoption (i.e. on 14 May 2015).
The following criteria were used for drafting the List: (i) countries with the corporate profit tax rate 5 percent lower or more with respect to Ukraine (іі) countries that do not disclose ownership structure of the legal entities, and/or (iii) countries that do not have international agreements with Ukraine on mutual information exchange.
Therefore, overall number of countries on the List was increased up to 76. In particular, the List has been expanded by putting Austria, Turkmenistan, Niue (Associated state of New Zealand), Hong Kong Special Administrative Region of the People's Republic of China on the List. At the same time, only Albania was excluded from the List.
As it was previously noted, cross-border operations with the countries on the List are subject to transfer pricing control according to tax and customs legislation of Ukraine since 14 May 2015.
It is important to note, that transfer pricing control of cross-border operations with legal entities from the countries on the List will apply only in relation to corporate profit tax. Nevertheless, before 1 January 2015 transfer pricing control was applied in relation to charging of the corporate profit income tax, as well as VAT.
Most likely, the List will be updated after one-year period. According to the Ukrainian legislation, the Cabinet of Ministers of Ukraine (as the highest executive power which supervises the tax and customs policy) is obliged to annually publish the updated version of the List in the Ukrainian official gazette, and place it on its official web-site, specifying the profit tax rates of the respective countries.
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