The draft bill on transfer pricing, prepared by the State Tax Service of Ukraine (STSU) jointly with PricewaterhouseCoopers, will be tabled in parliament in January 2013, and in case of adoption, it may become effective as early as on July 1, 2013, according to STSU chief Oleksandr Klymenko.
“I believe that a Verkhovna Rada [parliament] session is to begin on January 10, and we’ll table the draft law for consideration at first reading. As for [its] implementation, there are two options here: January 1, 2014 or July 1, 2013. Therefore we’ll be doing our utmost to pass it in the first quarter of 2013 comprehensively – at first and second reading,” Klymenko said during the presentation of the draft law to Ukrainian businessmen on Tuesday.
In his words, companies will have a week to study the draft law and put forth their proposals, and then the document will be sent to parliament.
“This bill will be tabled in parliament after discussions, and I guarantee it will be adopted,” he said.
Under the bill, monitored will be not only foreign economic operations with residents of the countries with low tax rates, but also transactions inside a group of companies (between affiliated entities). In both cases this is applicable if a total sum of transactions with a counteragent exceeds Hr 50 million per year.
Klymenko notes that the Hr 50 million level is under discussion now, although he says it is “a rather objective figure, which will allow tax authorities not to miss important things and deliver businesses from some unnecessary reports.”
Businessmen in turn say that the threshold should be higher. In particular, SCM Chief Financial Officer Marharyta Povashnaya said that the Hr 100 million would be more acceptable for Ukrainian businesses.
The bill foresees that companies should submit a report on monitored operations and documents related to transfer pricing on transactions every year before May 1.
The documentation will contain detailed information about transactions, counterparties involved in transactions, risk analysis and justification for the selection of a particular price level.
Fines worth 5% of the sum of a monitored operation is to be introduced for the failure to provide the report, and a fine worth 100 minimum wages is fixed for the failure to submit other required documents.
The bill also introduces a new type of inspections – a special inspection on transfer pricing. These will be long-term checks – from six to twelve months. In this case, tax authorities will not be authorized to check the pricing in monitored transactions as part of a usual inspection, but could check whether all transactions are reflected in the report.
