The Tax Service has all the resources in its disposal to control quality of the offshore operations – Serhii Verlanov

World is tightening control over the offshore operations and Ukraine supports these processes.  This was stated by Chairman of the STS Serhii Verlanov at the international practical conference “Ukraine Anti-offshore” organized by Ukrainian Chamber of Commerce and Industry.

“What is the Ukrainian business today? – this is the corporate sector and 1 million of registered legal entities, out of which approximately 250 thousand are the VAT tax payers, 250-300 thousand – the income tax payers. Another 1.85 million work as individuals-entrepreneurs. If in 2017 we received 2 thousand reports on controlled operations within the framework of transfer pricing in the amount of 1.5 trillion UAH, then in 2018 about 2.5 thousand reports were received in the amount of 2.2 trillion UAH taking into account the criteria invariance”- stated Serhii Verlanov.  

According to him, our taxpayers carry out the biggest volume of controlled operations with counterparties registered in Switzerland (33%), Cyprus (7.9%), UAE (6.3%). At the same time, 46% of the total volume of these operations is bank operations and 31% is commodity operations. Structure of controlled operations by the subject indicates that the biggest is the export of goods (43% - 2.4 trillion UAH). In turn, the biggest part in structure of the export of goods is occupied by the agro-industrial products - 17%, mineral raw materials (ores) - 20%, metals - 20%.

“That is why exporters of this group of goods are the focus of our transfer pricing control today. We also give a rather meticulous attention to operations with intangible assets and operations to finance Ukrainian business by the parent entities. But in general, the issue of transfer pricing control is quite new and complex; so that, more than a half of the acts of the TPO audits are challenged in the courts. Cases began to reach the Supreme Court and this year we received a landmark court decision which confirmed the correctness of the methodology used by the Tax service regarding the Public Joint-stock Company “Rivneazot”” – clarified Serhii Verlanov. 

According to Chairman of the STS, the Tax service has all the resources in its disposal to control quality of the operations with low tax jurisdictions – exchange of the tax information with foreign competent authorities, which has been reduced in time and has become more efficient, access to pricing databases, professional experts who are constantly improving their skills and have the opportunity to study with international experts. In addition, currently the legislative sphere is actively changing.

“It is important that more work has been done during the new Verkhovna Rada and Government than in the last few years to cover the possibility of applying the tax evasion schemes through the low-tax jurisdictions. For this the direction of tax control over repatriation of the non-resident income from Ukraine is restarted in the Tax service. You know that the ratified protocols with Switzerland, the United Kingdom and Cyprus, which are the most popular among Ukrainian businesses for withdrawal of income abroad, including the reduced or zero passive income tax rates. Now such schemes will become simply unprofitable and the budget will additionally receive hundreds of millions of hryvnias. We also look forward to the tools that the implementation of the BEPS will give us” – said Serhii Verlanov. 

At the same time, Chairman of the TS emphasized that the Tax service will be as friendly as possible to honest taxpayers.

“Next year, we will reduce the number of scheduled audits by 20%. We will work to minimize the potential for conflicts between the tax authorities and taxpayers. Historically, the double interpretation of legislation has been one of the major problems. At present, we strive to make the transparent rules including the outreach. The STS is also ready to change its position if we have the appropriate court decision, which is a legal conclusion. We will also actively cooperate with the relevant parliamentary committee to improve the tax legislation” – emphasized Serhii Verlanov.