It should be reminded that in 2021, the changes in the field of transfer pricing voted by the Verkhovna Rada of Ukraine according to the Law No. 466-IX (№1210) came into force – according to which Ukrainian companies will prepare Global Transfer Pricing documentation (master file).
For whom is the preparation of the master file and global TP documentation relevant?
According to subpara. 39.4.7 of Article 39 of the Tax Code, the global documentation is prepared by the taxpayer if two requirements are met simultaneously
- it is a member of an international group of companies;
- the total consolidated income of the international group of companies for the financial year is equal to or exceeds the equivalent of EUR 50 million.
Transactions that the Ukrainian company carries out with non-residents of the state that provide preferential tax regimes to business entities, or in which the peculiarities of calculating the tax base actually allow business entities not to pay corporate income tax, then this is not a basis for preparing Global TP documentation.
What are the requirements for the preparation of the master file?
Global transfer pricing documentation (master file) is a set of documents or a single document drawn up in any form, which should contain information on
a) the system and structure of the organization of the international group of companies and the country in which the participants can carry out their direct activities;
b) information on the activities of the international group of companies, including
description of the key factors that make up the financial result
main sources of supply (goods/services) and determination of the amount of the largest income;
analysis of contracts, participants of the international group;
functional analysis of relationships between participants of the international group of relations;
description of agreements on business restructuring, acquisition and disposal of assets.
c) intangible assets used by international group companies in their activities;
d) description of financial activities of the international group companies;
e) consolidated financial statements of the international group company for the last financial year;
f) information on unilateral agreements that took place in transactions between members of the international group of companies.
What are the deadlines for the preparation of global TP documentation?
According to subpara. 39.4.9 of Art. 39 of the TCU, the territorial body of the State Tax Service has the right to send a request to provide global transfer pricing documentation to the taxpayer. The master file must be provided by the taxpayer within 90 calendar days from the date of receipt of the request.
It should be noted that the STS request can be sent in a year, but not later than three years from the end of the fiscal year. That is, for 2021, a request from the STS can be sent from 2023 to 2025 inclusive.
What are the penalties for not preparing?
If the payer does not provide the necessary documents, he will be fined in the amount of 300 subsistence minimum. This is specified in paragraph 120.3 of Article 120 of the Tax Code of Ukraine. In turn, according to paragraph 120.6 of Article 120 of the Tax Code of Ukraine, untimely submission of global documentation entails a fine in the amount of 3 minimum incomes for one late calendar day. However, the amount of this fine may not exceed 300 minimum living wages.
author – Taras Mishchenko / senior tax consultant
