The Cabinet of Ministers of Ukraine determines the percentage price range for each commodity, the list of specialized business publications, — comments on Yaroslav Romanchuk, managing partner of the International Legal Center EUCON. — And it has the right to expand the list of Foreign Trade Classification of Commodities. The percentage price range is approved by the Resolution of the Cabinet of Ministers of Ukraine No.749 of 2 October 2013”.
If the special rules (described in Clause 1) are applied and the price of commodities in the controlled transaction is lower than the usual price (for the sale of commodities) and/or higher than the usual price (for the purchase of commodities), the taxpayer is entitled to:
— Independently (no later than on 1 May of the year following the reported year) to determine and pay the tax liability based on the usual price, which is determined according to the terms of this clause, and to submit to the central executive body that establishes and implements the national tax and customs policies copies of the primary documents that confirm the controlled transaction, in particular, the agreement, specifications, cargo and customs declarations, waybills, invoices, the document that confirms shipment and/or receipt of commodities, as well as the source of information confirming that the usual price was determined correctly. The taxpayer will be exempt from penalties and (financial) sanctions and/or fines;
— Use any method of pricing provided for in clauses 39.3.1 of the Tax Code of Ukraine. The taxpayer should additionally submit copies of contracts (agreements) between such counterparty and the recipient of the commodities (if such recipient is not a related party of the counterparty of the controlled transactions and/or the taxpayer).
If the percentage range is applied, the formula of the usual price is as follows:
— the usual price for the sale of the commodities that are traded at the stock exchange = (exchange price — exchange price x 5%);
— the usual price for the purchase of the commodities that are traded at the stock exchange = (exchange price + exchange price x 5%).
According to Mr. Romanchuk, the list of exchanges that can be used as a source of information on prices is not established by the legislation yet. Therefore, taxpayers can search prices online at any exchange. They only need to consider comparability of market terms of transactions. “At the seminars of the School of Transfer Pricing, search algorithms and pricing are thoroughly analyzed, which enables representatives of accounting and financial offices to gain practical skills of applying special rules of transfer pricing”, he added.
It should be mentioned that such favorable conditions for individual business groups are perceived negatively by society in terms of equality of all business entities in view of tax legislation and, therefore, there are people demanding the invalidation of the rules.
Yaroslav Romanchuk – attorney, managing partner of the International Legal Center «EUCON»
Source: The Ukrainian Journal of Bussines Law No 4, April 2014. http://www.ujbl.info/article.php?id=440