Submission of report on controlled operations for 2022

State Tax Service of Ukraine reminds that deadline for taxpayers to submit reports on controlled operations (hereinafter – Report) and Notification on participation in the international group of companies (hereinafter – Notification), which are separate reporting forms for tax control over transfer pricing, is coming up.

Sub-paragraph 39.4.2 Paragraph 39.4 Article 39 of the Tax Code of Ukraine stipulates that the specified reporting is submitted by the electronic communication means in the electronic form in compliance with requirements of the Laws of Ukraine "On electronic documents and electronic document management" and "On electronic trust services" by October 1 of year following reporting year, by taxpayers who in the reporting year carried out controlled operations.

In the current year, the last day for submission of Report and Notification on participation in the international group of companies for 2022 is October 2, 2023 (since deadline falls on a holiday).

Herewith, starting from the reporting year 2022, Notifications are submitted only by the taxpayers who are members of relevant international group of companies and by those, who in the reporting year carried out controlled operations.

Taxpayer’ liability for non-submission (late submission) of Report, Notification on participation in the international group of companies, failure to include in the provided Report or providing inaccurate information in Notification on participation in the international group of companies is provided for in Article 120 of the Code.

As an example, fine for failure to submit Report on controlled operations for the reporting year 2022 is 744 300 UAH and for failure to submit Notification on participation in the international group of companies for the same period is 124 050 UAH.

It should be noted that temporarily, for a period until termination or abolition of the martial law, there are special rules for holding taxpayers accountable for violations of tax legislation.

Norms of the Code (Paragraph 69 Sub-section 10 Section XX of "Transitional Provisions") determine that if the taxpayer does not have opportunity to fulfill tax obligations in a timely manner, in particular, with regard to submission of reports, such taxpayer is released from responsibility provided for by the Code with obligatory fulfillment of such obligations within six months after termination or abolition of the martial law in Ukraine.

Procedure for confirming the possibility or impossibility of the taxpayer's fulfillment of obligations specified in Sub-section 69.1 of Paragraph 69 Sub-section 10 Section XX "Transitional provisions" of the Code and list of documents for confirmation was approved Order № 225of the Ministry of Finance of Ukraine as of 29.07.2022, registered in the Ministry of Justice of Ukraine on 25.08.2022 under  № 967/38303.

For taxpayers who have not yet submitted Report and/or Notification on participation in the international group of companies, it is advised to review presentation materials on the algorithms for filling them out.

In case of self-discovered errors in the already submitted Report and/or Notification on participation in the international group of companies , the taxpayer has a right to submit the specified reporting with "new reporting" mark before deadline for its submission.

Reminder! Tax control to establish compliance with conditions of controlled operations to the "arm's length" principle is carried out by means of monitoring, surveys and audits.

Therefore, it is recommend that taxpayers check operations for compliance with legislative requirements and ensure timely and complete submission of the specified reporting.

Taxpayers, be aware of the fact that in case that the taxpayer applies conditions that do not comply with the "arm's length" principle and/or does not correspond to a reasonable economic reason (business purpose) during implementation of controlled operations, the taxpayer has a right to independently adjust price of controlled operations and amounts tax obligations, provided that this does not lead to a decrease in the amount of corporate income tax payable to the budget (Sub-paragraph 39.5.4 Paragraph 39.5 Article 39 of the Tax Code of Ukraine).

Along with this Sub-paragraph 69.38 of Paragraph 69 Sub-section 10 Section XX "Transitional provisions" of the Code defines that temporarily, for a period from August 1, 2023 until termination or abolition of the martial law, in case that the taxpayer independently corrects errors that led to the understatement of tax obligations in compliance with procedure, requirements and restrictions specified in Article 50 of the Code, such taxpayer is exempted from accrual and payment of fines and penalties provided for in Paragraph 50.1 Article 50 of the Code.

As follows, in order to determine the need for self-adjustment, the State Tax Service recommends that taxpayers review operations carried out both in 2022 and in previous reporting periods for compliance with the "arm's length" principle and take advantage of the opportunity to submit clarifying calculations without application of fines and penalties.