Improvement of taxation system in Ukraine in the transfer pricing direction is among priority measures of the National Revenue Strategy until 2030

State Tax Service of Ukraine, as a part of the implementation of measures of the National Revenue Strategy until 2030, is actively implementing modern innovative, technological and effective solutions aimed at improving taxation system in Ukraine in terms of countering aggressive schemes of international tax planning, ensuring effective protection of tax base against its erosion and withdrawal of income from taxation and transfer of capital abroad, including in the transfer pricing direction.

Specifically, to implement the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports to which the State Tax Service of Ukraine joined as a competent authority on November 3, 2022 and which entered into force on July 4, 2024, the Subsystem "Automatic exchange of tax information" of the Information Communication System was implemented "International automatic exchange of information" (hereinafter – subsystem "AOPI"). It is designed to automate process of tax information exchange between Ukraine and competent authorities of foreign jurisdictions and provides for:

formation of the list of taxpayers who must report according to the Country-by-Country standard (hereinafter – CbC);

acceptance and transmission of Country-by-Country reports of the international groups of companies according to the unified CbC standard through the CTS platform within framework of the MCAA CbC agreement;

automatic processing of the CbC reports, including verification of file formats and integrity, verification of completion for compliance with the OECD requirements;

compliance with information confidentiality.

Introduction of the automatic exchange of tax information across the CbC countries allows to receive comprehensive information on activities of the international groups of companies in specific jurisdictions, as well as to carry out effective analysis of the scope of activities, structure of operations and specifics of activities of the International groups of companies for control purposes over the transfer pricing.

The subsystem is a tool that allows exchange of tax information with the most countries of the world according to relevant reporting standards, increases level of tax control efficiency, increases tax base and contributes to the destruction of tax liability minimization schemes.

Another priority measure of the National Revenue Strategy is creation and implementation of a fundamentally new IT solution to control the international taxation risks according to standards of the risk management system and integrity principles – Information Communication System "Automated system for processing large data sets for analysis of the transfer pricing risks (ICS Big data TP)".

ICS Big Data TP uses more than 100 data processing algorithms, as well as information from the global price analytical sources, analyzes and researches tax, financial and other reporting, information from customs declarations, determines structure of controlled operations and foreign economic activity, calculates indicators of financial activity, profitability, solvency, liquidity, business activity, etc., which, in turn, contributes to solving the following tasks:

improvement of the risk-oriented approaches, including in relation to calculations of risks of non-compliance with conditions of controlled operations with the "arm's length" principle;

increasing speed, accuracy and efficiency of results;

increasing level of tax compliance;

reducing influence of the "human factor".

In the future, it is planned to expand functionality of the ICS Big Data TP with additional modes in order to identify and analyze global risks in the international operations (Global Risk of International Operations – GRIO), which will contribute to the effective risk management and increase analytical capacity of the State Tax Service’s units on the international taxation.

Implementation of a set of measures to improve taxation system in Ukraine in the transfer pricing direction, as a component of the National Revenue Strategy, will contribute to ensuring macroeconomic and financial stability, improving tax administration processes, European integration processes and adapting national legislation of Ukraine to the EU legislation and, as a result, will lead to creation of conditions for fair tax policy for all participants in the tax process. 

Information Communication System Big Data TP was implemented with support of the EU Public Finance Management Support Programme for Ukraine (EU4PFM) project.