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The Cabinet of Ministers Has Approved a List of States (Territories) Where the Operations with Residents are Recognized as Controlled for the Purposes of TP

On December 27, 2017, the Cabinet of Ministers of Ukraine approved a new list of states (territories) where the operations with residents are recognized as controlled for the purposes of transfer pricing. It was due to the recent changes in the selection criteria. The new list was formed according to the following criteria:

  • state (territories) where the corporate income tax rate is 5 and more percentage points lower than in Ukraine (that is, below 13%);
  • states with which Ukraine has not concluded international agreements containing provisions on the exchange of information;
  • states which competent authorities do not provide timely and complete exchange of tax and financial information for the requests of the SFS.

When considering the criterion of the rate of corporate income tax, not only basic but also preferential rates for individual industries, territories, and types of activities were taken into account.

Operations with a counterparty registered in the state (in the territory) entered in the approved list are recognized as controlled ones for the purposes of transfer pricing from the 1st of January of the reporting year, following the calendar year in which the states (territories) were included in such a list and with respect to them, a report is submitted to the regulatory authorities. Such a policy prevents tax evasion and base erosion and ensures taxation of profits in the country of origin.

The new list includes 85 states (territories). When compared with the previous version, the new one includes such countries as Guadeloupe, Guatemala, French Guiana, the Commonwealth of Dominica, the Dominican Republic, Estonia, Iran, Cuba, Laos, Latvia, Lebanon, Mauritius, Malta, Morocco, Monaco, the UAE, Singapore, Georgia and Hungary.

It is supposed that the changes will contribute to increasing the revenue to the state budget of Ukraine.