From 1 September 2013, new transfer pricing rules were introduced into Ukraine's Tax Code.

New, complex transfer pricing regulations have been introduced in Ukraine. These new rules are likely to have a significant impact on Ukrainian business and create additional possibilities for tax authorities to scrutinise business transactions.

Controlled transactions

Controlled transactions are defined as transactions exceeding an annual threshold of UAH 50 million (ca. EUR 5 mln) between: (i) Ukrainian resident related parties if one of them, as at the beginning of the relevant reporting year, has declared losses in the previous reporting year, has used a special tax regime, has paid corporate income tax (CIT)/VAT at a non-standard rate, or is not a registered CIT/VAT payer; (ii) Ukrainian resident and non-resident related parties; and (iii) Ukrainian resident and non-Ukrainian resident non-related parties if such a non-resident party is a taxpayer in the jurisdiction with a CIT rate less than the Ukrainian standard CIT rate by five or more per cent.

Related parties

Broadly, related parties are defined as parties (legal entities or individuals) that are in specific relations influencing the conditions or results of their business activities. In particular, the following parties are considered "related" under the law:

  • a party that owns (directly or indirectly) 20% or more of the shares of another party;
  • legal entities that have a common parent that owns (directly or indirectly) 20% or more shares of such legal entities;
  • a legal entity and a party that acts as or has the authority to assign a sole executive body of such entity or has the authority to assign (or elect) over 50% or more of the management board of such entity and/or its supervisory board;
  • a legal entity and an individual who is authorised to act as the sole executive of such entity, or legal entities of which 50% and more of the management and/or supervisory board is represented by the same individuals or elected by the same party;
  • legal entities that have the same individuals acting as their sole management body; and
  • relatives.

Advance pricing arrangements

A large taxpayer may negotiate a transfer pricing arrangement with the tax authorities and sign an agreement for a certain period of time whereby the tax authorities approve the taxpayers transfer pricing policy.

The following items may be agreed in such agreement:

  • a list of goods;
  • prices for the goods and transfer pricing method;
  • a list of information sources used to define the prices;
  • the validity period of the agreement;
  • permitted deviations from the economically justified conditions of operations;
  • the procedure and timing for provision of documentary support for pricing in controlled transactions.

Notification regime

Taxpayers must notify the tax authorities of the so called "controlled transactions" and submit a report on it in the format established by the Cabinet of Ministers of Ukraine. The tax authorities may further request the relevant transfer pricing documentation related to such controlled transactions. In such instance, depending on the size of the taxpayers business, the taxpayer must further submit to the tax authorities: (i) the primary documentation supporting the arm's length level of the relevant transactions; or (ii) specific detailed information related to each controlled transaction (eg, transaction description, description of payment terms, economic and benchmark studies, factors which impact the transaction price, etc.)


Failure of a taxpayer to submit the report on controlled transactions will result in a fine of 5% of the total amount of the taxpayer's controlled transactions. Failure to submit supporting transfer pricing documentation will result in a fine of 100 minimum wages (currently ca. EUR 12,000).

A minimum fine of UAH 1 will apply for each violation of transfer pricing rules within the transition period from 1 September 2013 until 1 September 2014 if the relevant transfer pricing reports and supporting documentation are properly provided to the tax authorities by the relevant taxpayer.

Quote: The 2013 amendments to the Ukrainian transfer legislation establish new compliance requirements for Ukrainian businesses.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.