Control over the transfer pricing: 245 million UAH of income tax was additionally accrued according to the audit results

Taxpayers, please recall the need to submit reporting on controlled operations for the reporting year 2020 and notification of participation in the international group of companies by 01.10.2021.

Timeliness and completeness of declaring controlled operations and, as a consequence, accrual and payment of the income tax on such operations is under the constant STS’s control. Annually, taxpayers submit about 2.5 thousand reports on controlled operations for 2 trillion UAH.

Although taxpayers who violate reporting of controlled operations are not subject to penalties provided for in the Tax Code during a quarantine period but they’re obliged to report about controlled operations is not cancelled.

At the same time, penalties are significant and can reach 300 living subsistence levels for able-bodied individuals and will be applied by the STS after the end of quarantine.

In order to determine the non-reporting facts regarding controlled operations and incomplete reflection of all controlled operations in submitted reports, as well as to identify transfer pricing risks, the STS uses data from leading global information, analytical sources and information of competent foreign authorities.

Taking into account established non-compliance facts regarding conditions of controlled operations with the principle of “outstretched hand”, the STS has already completed 14 audits in 2021, as a result of which 245 million UAH of income tax was additionally accrued; losses were reduced by 1.3 billion UAH.

Currently, there are 35 ongoing audits of controlled operations with estimated surcharges amounting to 1.4 billion UAH of the income tax and loss reduction by 3.5 billion UAH.

Work in working out risky controlled operations continues. To date, 25 cases have been selected for further control and verification measures, under which the understatement of taxation object is about 4.3 billion UAH.

Given the significant penalties, the STS recommends taxpayers to review their operations for the criteria compliance with controlled operations, as well as their formation indicators  for taxation object and take opportunity to adjust the price of controlled operations and amount of tax liabilities before the beginning of specified audits.

Communicate with the State Tax Service remotely using the “InfoTAX” service