Transfer Pricing: Rules for Working with the State Tax Service May Change

Ukraine is preparing changes to the rules governing transfer pricing and the resolution of international tax disputes.

The changes concern Draft Law No. 15518, which addresses advance pricing agreement procedures for controlled transactions and mutual agreement procedures.

For most entrepreneurs, transfer pricing may seem like a rather narrow tax issue.

However, for large businesses, international groups, and companies conducting controlled transactions with non-residents, a transfer-pricing error may result in millions of hryvnias in additional tax assessments.

This is especially relevant to transactions between related companies, exports and imports, royalties, financing, or transactions with non-residents from certain jurisdictions.

The main problem does not arise when the State Tax Service has already initiated an audit.

It arises much earlier—when the transaction structure and pricing approach were designed incorrectly from the outset, or when the business cannot properly substantiate them.

That is why the advance pricing agreement mechanism is particularly relevant for large businesses.

The logic is straightforward: in cases defined by law, rather than waiting for the State Tax Service to challenge a transfer price several years later, a company can agree in advance on the methodology for determining whether the terms of controlled transactions comply with the arm’s length principle.

This is especially important for large international groups, where a single tax dispute may arise simultaneously in several jurisdictions.

Therefore, companies involved in controlled transactions should view transfer pricing not merely as an annual report to be filed with the State Tax Service.

Transfer pricing is part of an international business structure that should be designed before a transaction is carried out—not explained after an audit has begun.

The WINNER Law Firm provides legal support for international business structuring, controlled transactions, foreign economic activity, investment agreements, and international taxation matters.

Would you like a consultation? Call: 096 574 81 02. Write to: info@uk-winner.com

You can seek legal assistance now so that you do not need to seek legal defense later.

Author: Ihor Yasko, Managing Partner at WINNER Law Firm, PhD in Law.