Results of independent price adjustment of controlled operations carried out during 2023

State Tax Service of Ukraine informs that more than 400 taxpayers made price adjustments of controlled operations and amounts of tax liabilities during 2023, as a result of which they voluntarily increased financial result before taxation by 6.9 billion UAH, which led to accrual of income tax in the amount of 0.6 billion UAH and reduction of negative value of taxation object in the amount of 3.7 billion UAH.

The biggest number of adjustments were made by taxpayers operating in such industries as chemical and pharmaceutical (32 percent), machine-building (17 percent), agro-industry (10.5 percent), food (6 percent), financial and banking (4.1 percent) and fuel (2.5 percent).

Main countries of registration of non-resident counterparties, in respect of which price adjustments were made of controlled operations and amounts of tax liabilities, are the Swiss Confederation (19 percent), United Arab Emirates (14 percent), Federal Republic of Germany (9 percent) and Republic of Cyprus (6 percent).

Therefore, every 6th taxpayer who submitted report on controlled operations made independent adjustment of tax liabilities during 2023. In addition, it is worth noting that the above-specified amount of adjustments is greater than the average annual figure by 2.7 billion UAH.

Such result is a consequence of systematic work of controlling bodies and indicates increase in level of tax culture. More than 55 percent of the total amount of adjustments made by taxpayers who received requests to submit information according to Paragraph 73.3 Article 73 of the Tax Code of Ukraine (hereinafter – Code) and documentation (additional information) on the transfer pricing.

Also, developed procedures for establishing compliance with conditions of controlled operations for raw materials with the "arm’s length" principle had a significant influence on formation of taxpayers’ position (Order of the Ministry of Finance of Ukraine № 19 as of 18.01.2022).

Application of methodology and approaches defined by regulations made it possible for taxpayers (exporters/importers of raw materials) to review calculations of the taxable profit amount according to the "arm's length" principle and to independently adjust tax liabilities based on results of a review of prices of controlled operations and amounts of tax liabilities before the start of audits on the transfer pricing matters.

Please note that the Law of Ukraine № 3219-ХХ as of 30.06.2023 "On amendments to the Tax Code of Ukraine and other laws of Ukraine regarding taxation peculiarities during the martial law" made changes to Paragraph 69 Sub-section 10 Section XX "Transitional Provisions" of the Code, according to which temporarily for a period from August 1, 2023 until termination or abolition of the martial law on the territory of Ukraine, in case of self-correction by the taxpayer in compliance with procedure, requirements and restrictions defined by Article 50 of the Code, errors that led to understatement of tax liability, such payer is exempted from accrual and payment of financial sanctions and penalty provided for in Paragraph 50.1 Article 50 of the Code.

In this regard, the State Tax Service recommends taxpayers to review conducted controlled operations, both during 2023 and previous reporting periods, regarding their compliance with the "arm’s length" principle, and take advantage of the opportunity to calculate tax liabilities according to the minimum or maximum values of price/profitability ranges (depending on the research party) and submit clarifying calculations without application of financial sanctions and penalty.