Tax audit of controlled transactions

Tax audit of controlled transactions is the service of a tax consultant from AGTL Kharkiv, Kyiv, Odessa. The TC checks are carried out under special procedures and within the framework of separate procedural provisions of the Tax Code of Ukraine.

Obviously, it’s extremely difficult to prepare and formulate the required information, isn’t it?

Especially if, for one reason or another, you were not ready for inspection in advance. We will be happy to assist you in accompanying tax audits and making the necessary documentation in the shortest possible time and with a guarantee of high quality. We hope that our support will be useful for you and will help to minimize the risks of additional taxation. In any case, we would be happy to represent your interests when appealing the results of the inspection, if they were unsatisfactory, before the tax authorities and in court.

We specialize in tax law and are happy to provide our clients with all our experience.

Reasons to check controlled operations

Tax audit of controlled transactions, its grounds are:

(a) Sending a notification to the supervisory authority in accordance with the NCU;

b) Identification by monitoring controlled operations of non-conformity to the conditions of controlled operations to the principle of “extended hand”;

(c) failure to provide a tax payer or submit a report on controlled transactions or transfer pricing documentation in violation of the NCU’s requirements.

() Obtaining well-documented information and data that show that the conditions of the controlled operation are not in line with the “extended hand” principle.

How to check controlled operations

Tax audit of controlled transactions is carried out in the Order established by the central executive authority, which ensures the formation and implements the state tax and customs policy.

The provision of tax-paying documents takes place in accordance with the requirements of paragraphs 85.2 and 85.3 of Article 85 of the NCA within 10 days of the date of the start of the inspection.

If additional documents are required to confirm the financial and economic transactions during the inspection, they are provided by the tax payer within 15 days of the date of receipt of the request of the supervisory authority.

The supervisory authority is not entitled to conduct more than one check of the controlled operation of a single tax payer during the calendar year.

If the tax payer, who is a party to the controlled operation, in relation to the said operation, has been inspected for controlled operations and the results of such an audit have established that the prices of the controlled operation are consistent with the “extended hand” principle, it cannot be checked by tax payers who are other parties to the operation in the same controlled transactions.

Checking controlled operations does not prevent other checks identified by the NCU.

The period of verification of controlled operations is calculated from the date of the decision to conduct it until the day of the certificate (act) on the conduct of such verification.

The duration of the check

Tax audit of controlled transactions for a duration should not exceed 18 months.

Every six months of the monitoring of controlled operations, the supervisory authority gives the tax payer information about the current state of the audit.

If it is necessary to obtain information from foreign state authorities, conduct an examination and/or transfer to the Ukrainian language documents necessary to investigate the compliance with the conditions of the controlled operation principle of “extended hand”, the period of verification by the decision of the head (deputy head) of the central executive authority, which implements the state tax and customs policy, can be extended for a period not exceeding 12 months.

For how long?

During the verification of controlled operations, controlled operations can be checked for a three-year period.

If the tax payer used the most appropriate method of establishing compliance with the conditions of controlled operations in accordance with the criteria provided by the NCA, this method is used during the inspection by the supervisory authority.

If the regulatory body has proven that the tax payer’s method (combination of methods) does not allow the most reasonable compliance with the conditions of the controlled operation to the “extended hand” principle, he has the right to use other methods (combination of methods) to ensure that the conditions of the controlled operation are consistent with the principle of “extended hand”.

The use of methods (combination of methods) to establish compliance with the conditions of the controlled operation to the principle of “extended hand” not established by this article is prohibited.

Officials who review controlled transactions have the right to refer tax payers who are parties to controlled transactions that are being audited, request documents (information) on operations and/or conduct counter-checks in accordance with article 73 of this Code and conduct a survey of officials and/or tax payers who are parties to controlled transactions.

The tax payer is required to ensure that officials who conduct background checks conduct interviews with the relevant officials or employees.

Making the results of a controlled operation review

Tax audit of controlled transactions, or rather its results are made in the form of an act (reference), which is drawn up in two copies, is signed by the officials who conducted the inspection, and the tax payer or his representative.

If the results of the inspection revealed that the conditions of the controlled operation differ from the conditions that correspond to the principle of “extended hand” that led to the understatement of the amount of tax, an act of verification is drawn up. If there are no such violations, a certificate is drawn up.

In the case of non-transfer pricing audits, tax liabilities have already been added on the basis of price adjustments and limits on the level of expenditure and income for such transactions, the amounts of pre-assessed tax liabilities as a result of such verification are included in the repayment of accrued taxes as a result of the audit of controlled transactions.

Form of act

The form of the act (reference) on the results of the inspection of the controlled operation and the requirements for its (its) compilation are established by the central body of the executive branch, which ensures the formation and implementation of the state tax and customs policy.

The Act on the results of the inspection of the controlled operation should contain documented facts of deviation of the conditions of the controlled operation from the conditions corresponding to the principle of “extended hand”, the justification that such a deviation entailed an understatement of the amount of tax, the calculation of the amount of such understatement.

In the case of the refusal of the tax payer or his representative from signing the act (reference) on the results of the inspection of the controlled operation by the officials of the supervisory body, an act is drawn up certifying the fact of such refusal.

The act (reference) of the inspection of the controlled operation must be handed over within two working days from the date of its receipt to the tax payer, for whom the inspection was carried out, or its representative under the receipt.

Objections to the act

Tax audit of controlled transactions has been carried out, and if the tax payer or his representative disagrees with the inspection findings or facts and the data set out in the act of verification of the controlled operation, they have the right to file their objections within 30 days of receipt of the act. At the same time, the tax payer has the right to submit documents (their certified copies) with objections or within the agreed period, confirming the validity of the objections.

Such objections are dealt with within 30 business days following the day they are received, and the tax payer is sent a response under article 58 of this Code to send (the delivery) of tax notices to decisions.

!!! Materials and information obtained by the territorial body of the central executive authority, which implements state tax and customs policy, during the implementation of tax control measures for controlled transactions, can be used during the verification of other persons who are parties to such operations.

Tax audit of controlled transactions. Order an escort service.

We will advise you, help you organize accounting support, choose a tax system, and if necessary – check the processes of organizing your business on legal, accounting, tax, as well as financial issues. And believe me, your money will certainly come back to you.

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