Transfer pricing
Transfer pricing (transfer) – marketing of goods or services by interdependent persons at intra-company, different from market prices. They allow the distribution of the total income of a group of persons in favor of those in lower-tax states. This is the simplest and most common scheme of international tax planning, aimed at minimizing taxes paid. Transfer prices are subject to the control of the fiscal authorities of the state.
Transfer pricing (from the English “Transfer Pricing”, “TP”, abbreviated “TCE”) in simple words and in the classical sense it is customary to call the sale of goods, works and services within the holding between interdependent persons at prices potentially different from the prices accepted on the market.
Ukraine has special rules for checking transfer prices for tax purposes. Today it is one of the most complex and controversial institutions of tax law, requiring separate tax accounting, reporting and risk monitoring.
Our advantages
We understand the complexity and cost of these projects for our clients and respect their right to spend their money effectively. Unlike many, we strive to be efficient and economical for our customers. We are flexible in the organization of work in this area: we can both take on the full range of actions on TC In the company, and prepare methodical recommendations for the staff of the company about actions in a particular case. In many cases, the second option is much more efficient and profitable for the client: as a result of the project you spend less money on our services, and your staff acquires invaluable experience with TC, which you can use in the future. Believe me, it is profitable!
Transfer pricing services (controlled transactions between interdependent persons). Diagnosis of TCOs risks, determination of market prices, support in tax audits and notification of controlled transactions.
Services at TCO
Tax audits on controlled transactions
TC checks are carried out under special procedures and within the framework of separate procedural provisions of the Tax Code of Ukraine It is obvious that it is extremely difficult to prepare and formulate the required information, right? 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.
Determining market prices
Transfer pricing rules set five methods for determining market price to determine taxable income in transactions whose parties are interdependent persons
Controlled Transaction Report
The report on controlled transactions is an aid in filling out from AGTL Kharkiv, Kyiv, Odessa. The Form of the Controlled Operations Report (further report) and the Order of Its Filling (More – Order) are approved by order 669. The Report provides information about all transactions, which according to Article 39 of the Tax Code of Ukraine are controlled.
Diagnosis of TCE risks
Our experts will help you to identify the risks you have, build the optimal market price control structure and take on all the problems associated with communication with the tax authorities on the issue of controlled transactions. Due to the fact that there are still many legal gaps and inaccuracies in the regulation of transfer pricing rules, the interpretation of many rules is based only on the existing letters of the Ministry of Finance and the GFS of Ukraine. But despite the large number of such recommendations, many questions remain unactured, in addition, some of the letters contradict each other. Judicial practice cannot help in interpreting transfer pricing rules – at the moment it has not been formed yet.
A short algorithm for determining the status of a controlled operation
– Criterion 1: if the amount of income of the taxpayer for the year does not exceed 50 million UAH. The operation will not be considered controlled;
– Criterion 2: if the volume of the operation with a non-resident does not exceed 5 million UAH. The operation is not controlled;
– Criterion 3: if the contractor does not respond to any of the sub-criteria, namely: sub-criteria “A” – a counterparty from a low-tax jurisdiction; sub-criteria “B” – a non-resident contractor and a related person; sub-criteria “B” – foreign economic operations through non-resident commissioners; “G” subcriteria – foreign economic operations through “laying” – the operation is not controlled.
Transfer pricing tax control is carried out by monitoring controlled transactions or conducting taxpayer checks.
Monitoring is carried out by
Monitoring the prices and conditions of transactions carried out by comparing the price level and conditions of controlled transactions to detect price deviations;
Analysis of reports on controlled operations;
Analysis of documentation.
In the course of analyzing the reports, the controllers take into account the results of the company’s business activities. At the same time, the indicators of risk recognition, in particular, are:
Loss in the previous three years;
Industry-to-industry average profitability;
Business operations that are atypical of the payer’s current activities.
The tax code of Ukraine obliges every taxpayer, regardless of the type and nature of its activities:
- independently monitor the presence of so-called “controlled transactions” that fall under the rules of the TCE;
- to inform the specially authorized tax authority of the existence of such transactions on their own;
- Independently prepare the necessary documentation and justify the price in controlled transactions;
- pass a special type tax audit for such transactions if it is initiated.
Is it possible to do it yourself?
Yes, of course you can. This is a complex work, requiring additional resources, knowledge and qualifications from the taxpayer. Meanwhile, fines for violation of TCE rules are currently the largest in tax law.
To understand all the intricacies of transfer pricing, to avoid making mistakes, to build a methodology for accounting for market prices will help our experts.
Transfer pricing services (controlled transactions between interdependent persons). Diagnosis of TCOs risks, determination of market prices, support in tax audits and notification of controlled transactions.
We will advise you, help you organize a business, choose a tax system, and if necessary – accompany the process of organizing your business on legal, accounting, tax, as well as financial issues. And believe me, your money will certainly come back to you.