Parent companies of Ukraine submitted CbC Reports for the first time

Country-by-Country Report of the international group of companies (hereinafter – CbC Report) is a part of the three-level structure of documentation on transfer pricing, which was introduced in Ukraine in 2020. This reporting model is recommended by the Organization for Economic Cooperation and Development (step 13 of the BEPS Action Plan) in order to implement comprehensive control over operations within international groups of companies and create favorable conditions for doing business in Ukraine.

For the first time, it was necessary to submit CbC Reports to residents of Ukraine – parent companies of the international groups of companies for the fiscal year 2022  (submission deadline is January 1, 2024).

CbC Reports were submitted by 6 taxpayers who are the parent companies of the international groups of companies as of 02.01.2024 and are active in various fields (oil and gas, electricity, agriculture, railway transportation, financial services and trade).

Total number of participants of the international groups of companies is 152 companies, of which only 14 (or 9 percent) are not residents of Ukraine. In most cases, these international groups of companies – members are registered in such states (territories) as the Republic of Austria, Belgium, Republic of Cyprus, Republic of Latvia, Netherlands, Republic of Poland, United States of America, Slovak Republic and Swiss Confederation.

It should be emphasized that control over submission of the CbC Reports by taxpayers – residents of Ukraine, completeness and reliability of provided information is carried out by the State Tax Service of Ukraine, taking into account provisions of Sub-paragraphs 39.4.10 – 39.4.15 of Paragraph 39.4 Article 39 of the Tax Code of Ukraine (hereinafter – Code).

In case of identification of risks of non-submission (late submission) by taxpayer of CbC the Reports within the prescribed period in order to clarify circumstances of possible violation of requirements of Sub-paragraph 39.4.11 of Paragraph 39.4 Article 39 of the Code, the State Tax Service of Ukraine has a right to send a written request to the taxpayer to submit information according to Paragraph 73.3 of Article 73 of the Code.

That is, if the controlling body detects error in submitted CbC Report or receives notification of such errors from a competent authority of another jurisdiction based on the QCAA agreement, it notifies the taxpayer of the need to correct errors or clarify information in submitted CbC Report. In such case, the taxpayer is obliged to submit revised CbC Report with appropriate corrections or to provide explanation by the electronic communication means according to procedure provided for in Article 42 of the Code, not later than 30 calendar days from the date of receipt of the controlling body’s notification (Sub-paragraph 39.4.11¹ Paragraph 39.4 Article 39 of the Code).

Liability of taxpayers for non-submission (late submission) of the CbC Report, including clarifying and/or for providing inaccurate information, is provided for in Article 120 of the Code.

Please note that from January 1, 2024, amendments to Paragraphs 120.5 and 120.6 Article 120 of the Code entered into force according to the Law of Ukraine № 2970-IX as of 20.03.2023 "On amendments to the Tax Code of Ukraine and other legislative acts of Ukraine regarding implementation of the international standard of automatic exchange of information on financial accounts".

In particular, Clauses 6  7 of Paragraph 120.5 Article 120 of the Code provide that failure to submit  clarifying CbC Report within 30 calendar days from the date of receipt of the controlling body's notification of detected errors in the CbC Report is considered late submission by taxpayer of the CbC Report, for which a fine is applied, determined by Clause 7 Paragraph 120.6 Article 120 of the Code, for each calendar day of untimely submission of the CbC Report, starting from the 31st calendar day from the day of receipt of the controlling body's notification of identified errors in the CbC Report.

Along with this, fine provided for in Paragraph 120.5 Article 120 of the Code does not apply if the taxpayer submitted notification on participation in the international groups of companies and/or the CbC Report with errors that did not affect correctness of identification of the state or territory of which one or several members of the international groups of companies, and/or on correct identification of each of members of the respective international groups of companies, and/or on correct identification of jurisdiction of submission of the CbC Report, and such payer has corrected errors by submitting clarifying notification on participation in the international groups of companies and/or the Report CbC on its own or not later than 30 calendar days from the date of receipt of the controlling body’s notification of identified errors in the CbC Report.