{"id":18632,"date":"2016-06-13T14:59:38","date_gmt":"2016-06-13T11:59:38","guid":{"rendered":"https:\/\/euconlaw.com\/transfer-pricing-and-representations-of-non-residents\/"},"modified":"2016-06-13T14:59:38","modified_gmt":"2016-06-13T11:59:38","slug":"transfer-pricing-and-representations-of-non-residents","status":"publish","type":"post","link":"https:\/\/euconlaw.com\/en\/transfer-pricing-and-representations-of-non-residents\/","title":{"rendered":"Transfer pricing and representations of non-residents"},"content":{"rendered":"

A representation of foreign business is an institution or a person representing the interests of a foreign business entity in Ukraine, as for this it has duly accorded the appropriate mandate and acts in its interests and favor. Pursuant to the Tax Code<\/em>, a representation of a non-resident is treated as equivalent to a taxpayer carrying out its activities irrespective of the non-resident. An issue appears frequently in this connection as to whether the transfer pricing norms are applicable for transactions which are implemented by representations with residents of Ukraine. Should the representations submit reports? Who shall be part of a controlled transaction \u2014 a non-resident or its permanent representation?<\/p>\n

As Yaroslav Romanchuk<\/strong>, managing partner of the International Legal Center EUCON<\/strong> recounts, the State Fiscal Service of Ukraine recently examined this issue once again, and this examination resulted in the letter of 19 October 2015 No. 21974\/6\/99-99-19-02-02-15. This letter states that the representations of non-residents should not report with respect to performed controlled transactions, and those residents which have exceeded the established threshold of business transactions with representations shall submit reports.<\/p>\n

Let\u2019s refer to the norms of the legislation in force.<\/p>\n

According to Clause 14.1.122 of the Tax Code of Ukraine<\/em>, the affiliated branches, representations and other stand-alone divisions of foreign companies and organizations registered (accredited or legalized) in accordance with Ukrainian legislation and established pursuant to the legislation of other states which are\u00a0 located in Ukraine, are non-residents. At the same time, a permanent representation of a non-resident which carries out business activities at the territory of Ukraine, is treated, for tax purposes, as equivalent to a taxpayer which conducts its activities irrespective of such non-resident (Clause 141.4.7 of the TCU).<\/p>\n

\u201cThese allegations created confusion in minds of taxpayers. To whom are representations treated as equivalent \u2014 to residents or non-residents?\u201d, argues\u00a0 Mr. Romanchuk.<\/p>\n

For this reason, the State Fiscal Service has explained that a recognition for tax purposes of a permanent representation as a taxpayer which conducts its activities irrespective of such non-resident, does not change its status as a non-resident. Taking into account this feature of a permanent representation of a non-resident in Ukraine, the transactions of a resident with a permanent representation of a non-resident for transfer pricing purposes fall into the category of transactions with a non-resident.<\/p>\n

Accordingly, in the event that business transactions to a sum exceeding UAH 5 million (exclusively of indirect taxes) are carried out by a resident with a permanent representation of a non-resident \u2014 a related party, or a permanent representation of a non-resident which has a jurisdiction in the state, which has been included on the list of states approved by the Cabinet of Ministers of Ukraine<\/strong>, such transactions for a resident shall be recognized as controlled transactions provided it meets yearly income of more than UAH 50 million.<\/p>\n

According to Mr. Romanchuk, such residents must submit reports on controlled transactions until 1 May of the year following the reporting one. In this respect, for a permanent representation of a non-resident such transactions shall not be regarded as controlled transactions.<\/p>\n

\u201cA somewhat incomprehensible position, taking into account the fact that\u00a0 permanent representations pay income tax in Ukraine, and it makes no sense to carry out manipulations with prices in transactions between a resident and a representation\u201d, he considers and recalls that the tax people had a different view earlier, namely that the transactions with a representation are not monitored subject to submission by it of a certificate on payment of taxes in Ukraine.<\/p>\n

And for calculation of a value criterion, in the event that a resident of Ukraine carries out its business transactions both directly with a non-resident and with its representation in Ukraine, it has to be performed by summing up the transactions.<\/p>\n

Mr. Romanchuk recalled that the analysis of one\u2019s own controlled transactions should be carried out before the report on the controlled transactions is submitted since the income tax statement is submitted within 60 days following the last day of the reporting year. In case it is discovered that the price in a controlled transactions is not consistent with the principle of \u201carm\u2019s length\u201d, an additional tax assessment must be provided in the statement.<\/p>\n

Source: The Ukrainian Journal of Business Law<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

A representation of foreign business is an institution or a person representing the interests of a foreign business entity in Ukraine, as for this it has duly accorded the appropriate mandate and acts in its interests and favor. Pursuant to the Tax Code, a representation of a non-resident is treated as equivalent to a taxpayer [:]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[94],"tags":[],"yoast_head":"\nTransfer pricing and representations of non-residents - EUCON legal Group<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Transfer pricing and representations of non-residents - EUCON legal Group\" \/>\n<meta property=\"og:description\" content=\"A representation of foreign business is an institution or a person representing the interests of a foreign business entity in Ukraine, as for this it has duly accorded the appropriate mandate and acts in its interests and favor. Pursuant to the Tax Code, a representation of a non-resident is treated as equivalent to a taxpayer [:]\" \/>\n<meta property=\"og:site_name\" content=\"EUCON legal Group\" \/>\n<meta property=\"article:published_time\" content=\"2016-06-13T11:59:38+00:00\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/euconlaw.com\/#website\",\"url\":\"https:\/\/euconlaw.com\/\",\"name\":\"EUCON legal Group\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/euconlaw.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"#webpage\",\"url\":null,\"name\":\"Transfer pricing and representations of non-residents - EUCON legal Group\",\"isPartOf\":{\"@id\":\"https:\/\/euconlaw.com\/#website\"},\"datePublished\":\"2016-06-13T11:59:38+00:00\",\"dateModified\":\"2016-06-13T11:59:38+00:00\",\"author\":{\"@id\":\"https:\/\/euconlaw.com\/#\/schema\/person\/885bb53bf78f77a53b9f988b08ac37e9\"},\"breadcrumb\":{\"@id\":\"#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[null]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/euconlaw.com\/en\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Transfer pricing and representations of non-residents\"}]},{\"@type\":\"Person\",\"@id\":\"https:\/\/euconlaw.com\/#\/schema\/person\/885bb53bf78f77a53b9f988b08ac37e9\",\"name\":\"osadchyppua\",\"image\":{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/euconlaw.com\/#personlogo\",\"inLanguage\":\"en-US\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/05757e1f9a085053643881aaa3c3ee31?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/05757e1f9a085053643881aaa3c3ee31?s=96&d=mm&r=g\",\"caption\":\"osadchyppua\"},\"sameAs\":[\"https:\/\/euconlaw.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","_links":{"self":[{"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/posts\/18632"}],"collection":[{"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/comments?post=18632"}],"version-history":[{"count":0,"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/posts\/18632\/revisions"}],"wp:attachment":[{"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/media?parent=18632"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/categories?post=18632"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/euconlaw.com\/en\/wp-json\/wp\/v2\/tags?post=18632"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}