Exchange of tax information with foreign competent authorities is an effective tool for forming evidence base in the transfer pricing sphere

International exchange of tax information is gaining significant relevance in the globalization era, taking into account current tendencies in the implementation of full set of the OECD recommendations* and implementation of the BEPS Plan**. Purpose of such exchange is to establish uniform, transparent tax rules to prevent tax evasion by transnational business entities.

Working out the transfer pricing and international taxation issues, exchange of tax information with competent authorities of foreign countries is an important and effective tool for protecting economic interests of our country and means of blocking double or discriminatory taxation. State Tax Service continues process of exchanging tax information during the martial law.

Results of such exchange, namely are materials received by special requests, affect further control and verification activities. Sub-paragraph 78.1.21 Paragraph 78.1 Article 78 of the Tax Code of Ukraine provides for an unscheduled documentary audit in case of receiving information/documents from foreign state bodies regarding issues covered during previous audits of the payer, which indicate violation of tax, currency and other legislation. Such audit is carried out exclusively in relation to issues that became the basis for conduction of such audit.

State Tax Service of Ukraine continuously works in direction of information exchange, sending special requests to foreign competent authorities. Received answers are processed and used in formation of the evidence base, high-quality documentation of violations, ensuring receipt of monetary obligations to the budget and, as a result, formation of exemplary cases in the course of conducting work in the transfer pricing areas and international taxation, which, in turn, strengthens positions of the State Tax Service during legal appeals.

To date, materials received as a part of special requests in 80 percent of cases affect effectiveness of measures to control compliance with tax legislation in the specified areas.

*OECD – Organization for Economic Cooperation and Development

**BEPS Plan – Plan to combat domestic tax base erosion and profit shifting