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Published on Dezember 28, 2017
Almost EUR 96 Million of tax liabilities and penalties assessed in course of tax audits, around EUR 151 Million of tax liabilities resulting from self-initated transfer pricing adjustments and more than 100 litigations. These are the results of enfocement of transfer pricing legislation by Ukranian fiscal authorities as of September 2017, almost 4 years after enactment in 2013.
As follows from the court decisions in the transfer pricing area, in most cases the taxpayers seek cancellation of penalties for non-compliance. These penalties are imposed mostly for the failure to submit report on controlled transactions and the failure, often unintentional, to disclose controlled transactions. Because penalties are significant, the taxpayers have good reasons to challenge the penalties for untintentional violations in the court.
There are currently only a few court cases where the matter of the dispute is the tax assessment resulting from the transfer pricing adjustment. None of these cases has been finally decided yet. As follows from decisions of the courts of first and appeal instances, the fiscal authorities as well as the courts give more weight to purely legal reasoning for their decisions without going deeply into economic analysis.
One may expect that the number as well as the value of transfer pricing disputes will be growing. The reasons are the increasing number of transfer pricing audits as well as the increase in compliance obligations for the taxpayers. The latter may occur soon in connection with implementation of BEPS minimum standard, of which Action 13 is viewed by Ukrainian fiscla authorities as a priority. The transfer pricing, therefore, should be in focus of companies operating in Ukraine, as non-compliance is becoming costly.
Yuri Nikolaychuk
Associate Partner
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