Ukraine: Definition of a transfer pricing method for listed commodities

Published on January 23, 2017
 
On 8th of September 2016, the Cabinet of Ministers of Ukraine by Resolution No 616 approved the list of traded commodities for transfer pricing purposes. The approval of the list is important for taxpayers trading with commodities concerned, since the arm’s length pricing must now be examined on the basis of the comparable uncontrolled price (CUP) method.

Since enactment of the revised transfer pricing legislation in 2015, the Tax Code of Ukraine provides special rules for transactions with traded commodities. These rules require, in particular, application of the CUP method and the prices quoted on commodity exchange in the decade preceding the date of controlled transaction. If the taxpayer uses any method other the CUP method, the taxpayer shall submit to fiscal authority information identifying each related party involved in the supply chain and the profit margin realized by each related party.
 

• agricultural goods (livestock, meat, grains, food, seeds, palm and soybean oil etc.),
• energy commodities (coal, crude oil, natural gas, gasoline etc.),
• industrial and precious metals, cotton, rubber and
• other commodities.

• agricultural goods:
  Chicago Mercantile Exchange (CME), Euronext, Intercontinental Exchange (ІСЕ), New York Mercantile Exchange (NYMEX), National Commodity and Derivatives Exchange (NCDEX), and others;
   
• energy commodities:
  Intercontinental Exchange (ІСЕ), European Energy Exchange (EEX), Chicago Mercantile Exchange (CME), Tokyo Commodity Exchange (TOCOM), European gas hubs (NCG, CEGH, GASPOOL) and others;
   
• industrial and precious metals:
  Intercontinental Exchange (ІСЕ), London Metal Exchange (LME), Dubai Gold and Commodities Exchange (DGCX), Chicago Mercantile Exchange (CME) and others;
   
• cotton and rubber: 
  Chicago Mercantile Exchange (CME), Intercontinental Exchange (ІСЕ), Multi Commodity Exchange of India Limited (MCX), Singapore Exchange (SGX), Shanghai Futures Exchange (SHFE) and others.

The approval of the list of traded commodities and commodity exchanges has a high practical relevance for many taxpayers with cross border Intercompany relations. Therefore, concerned taxpayers should be prepared to comply with these rules when submitting reports and documenting transactions for financial years 2016 and ongoing.