Declaration results of controlled operations for 2023: key results

Press service of the State Tax Service of Ukraine, published 03 December 2024 at 15:07 Chapter: News

State Tax Service of Ukraine received 2530 reports on controlled operations  based on results of reporting year2023, which is approximately 9% more than the last year’s figure (as of 01.11.2024).

Amount of controlled operations declared by the taxpayers is 2.5 trillion UAH, which is 14% more than amount of the previous reporting year.  

Majority of controlled operations were carried out with non-residents registered in the Republic of Austria (20%), Swiss Confederation (16%), Kingdom of Netherlands (9%), French Republic (8%), United States of America (6% each) and Federal Republic of Germany (5%).

A significant share in the total volume of commercial operations is occupied by operations with products – 49% (including commodities – 25%) and banking services – 28%. Other categories of operations have a much smaller share, in particular, services – 9%, financial services – 8%, operations with securities– 5% and others – 1%. 

Taxpayers used the following transfer pricing methods to establish compliance of controlled operations with the “arm's length” principle: comparative uncontrolled price method (301, 306, 307) – 62%, net profit method (304) – 35%, resale price/cost plus/profit split methods (302, 303, 305) – 3%.

Compared to the previous reporting years, use of comparative uncontrolled price method by the taxpayers in controlled operations involving commodity items has increased by 10 percentage points.

It is worth noting that from January 1, 2023, approved Procedures for establishing conditions compliance with the “arm's length” principle for commodity products, approved by Order of the Ministry of Finance of Ukraine № 19 as of 18.11.2022, registered in the Ministry of Justice of Ukraine on 16.06.2022 under № 662/37998, came into force. These Procedures do not establish new regulations, but rather disclose in more detail methodological aspects of determining conditions compliance of controlled operations with the “arm's length” principle and transfer pricing control (priority of comparative uncontrolled price method, peculiarities of making adjustments, etc.). Therefore, establishing conditions compliance of individual controlled operations with the “arm's length” principle can actually be carried out by the taxpayers and regulatory authorities according to logical and consistent rules specified in Procedures, also retrospectively.

According to requirements of Sub-paragraph 39.4.2 Paragraph 39.4 Article 39 of the Tax Code of Ukraine (hereinafter – Code), the taxpayers who carried out controlled operations in the reporting year 2023 and are part of the international group of companies were required to submit notification on participation in the international group of companies (hereinafter – Notification) together with report on controlled operations.

Such Notifications were submitted by 1736 taxpayers. The main countries (territories) of tax residency of parent companies of the international group of companies are the Republic of Cyprus – 21%, Federal Republic of Germany, United States of America – 10% each, French Republic, Swiss Confederation – 5% each, Ukraine, Republic of Austria and United Kingdom – 4% each, Kingdom of Netherlands – 3% and other countries of the world – 34%.

Also, the taxpayers, using provisions of Paragraph 50.1 Article 50 and Sub-paragraph 69.38 Paragraph 69 Sub-section 10 Section XX "Transitional Provisions" of the Code, independently adjusted price of controlled operations and amounts of tax liabilities and submitted the Transfer pricing annex to the corporate income tax declaration for reporting year 2023 in the amount of 3.7 billion UAH, which is more than 71 percent of the total amount of adjustments made in 2024 (5.2 billion UAH).

Taking into account above specified, the State Tax Service emphasizes advisability of the taxpayers reviewing terms of controlled operations for their compliance with the “arm's length” principle and voluntary payment of the corporate income tax liabilities before conducting the transfer pricing audits.