Attorney on transfer pricing

Transfer pricing in Ukraine: key aspects, criteria and legal support

Transfer pricing (TP) is one of the most complex topics of tax law, which has become increasingly relevant for Ukrainian companies in recent years. Correct application of transfer pricing rules helps to avoid unnecessary tax risks, fines and litigation. In this article, we will consider when and who needs to apply TP rules, who falls under controlled transactions, the main criteria, and how legal support helps to protect business interests.

When does transfer pricing apply?

Transfer pricing rules in Ukraine are regulated by Chapter 7, Section III of the Tax Code of Ukraine. They apply in the case of controlled transactions, i.e. agreements between related parties that may affect the amount of tax liabilities.

TP is applied when:

• The parties to the transaction are related (have significant influence or control).
• The transaction amount exceeds the thresholds established by law.
• The transaction may affect the distribution of profits between related parties, in particular, the understatement or overstatement of the price.

The main objective is to ensure that prices in such transactions comply with the arm’s length principle, that is, they are the same as if the transaction were between independent counterparties.

Who must file a transfer pricing report?

According to Ukrainian legislation, transfer pricing reports are required to be submitted by taxpayers carrying out controlled transactions if their value exceeds the threshold of UAH 10 million per calendar year.

The transfer pricing report includes detailed information on related parties, terms of agreements, methods of determining the price and supporting documents. Submission of the report is mandatory and must be completed no later than 270 calendar days after the end of the reporting year.

Who is subject to controlled transactions?

Controlled transactions are agreements between related parties that meet certain criteria, in particular:

• Legal entities or individuals who have control or significant influence over each other (e.g., holding more than 25% of voting shares).
• Transactions between a resident and a non-resident, if they are related.
• Certain types of transactions that are defined by law, including the supply of goods, services, transfer of property, use of intangible assets, etc.

Controlled transactions may include both direct transactions and intermediary schemes that influence the formation of profits.

Transfer pricing determination criteria

To assess the correctness of transfer prices, internationally recognized methods are used:

1. Comparable Uncontrolled Price (CUP) method – compares the transaction price with the price for a similar agreement between independent parties.
2. Resale Price Method – determines the price based on the resale price of the product or service.
3. Cost Plus Method – calculates the price as the cost of production plus a reasonable profit.
4. Other methods, in particular, the profit-sharing and net profit method, are used in complex cases.

The choice of method depends on the specifics of the operation, availability of information and the industry.

Lawyer support on transfer pricing

Successful compliance with transfer pricing rules requires not only correct accounting and tax calculations, but also legal support. The benefits of working with a lawyer:

Consultations on the application of transfer pricing standards: analysis of business transactions, identification of related parties, selection of valuation methods.

Preparation and submission of a transfer pricing report: legal analysis of documents, formation of a complete and correct report.

Support during tax audits: protecting the client’s interests during audits, appealing the results, preparing evidence.

Developing a strategy to minimize tax risks: legal planning of pricing policies to avoid fines and additional charges.

Representation in court and administrative bodies: if disputes or conflicts arise with tax authorities.

Legal support helps not only to reduce risks, but also to optimize business processes in accordance with tax legislation.

Transfer pricing is a complex but important tax discipline tool that requires careful attention. Companies that carry out controlled transactions should not only comply with formal requirements, but also work with experienced lawyers for comprehensive support. This will not only avoid fines, but also ensure sustainable business development in the legal field.

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