LAW OF UKRAINE

of July 4, 2013 No. 408-VII

About introduction of amendments to the Tax Code of Ukraine of rather transfer pricing

The Verkhovna Rada of Ukraine decides:

I. Bring in the Tax code of Ukraine (Sheets of the Verkhovna Rada of Ukraine, 2011, No. No. 13-17, of the Art. 112) such changes:

1. In Item 14.1 of Article 14:

Subitems 14.1.69 and 14.1.70 to exclude 1);

Subitems 14.1.71 and 14.1.159 to state 2) in such edition:

"14.1.71. the regular price - the price of goods (works, services) determined by agreement parties if another is not established by this Code. If the return is not proved, it is considered that such regular price answers the level of market prices.

If price (markup) of goods (works, services) are subject to state regulation according to the legislation, the price established according to rules of such regulation is considered regular. This provision does not extend to cases when the minimum selling price or indication price is established. In that case the regular price of transaction is determined according to article 39 of this Code, but there cannot be less the minimum or indication price.

If during transaction implementation evaluating is obligatory, the project cost of assessment is the basis for determination of the regular price for the purposes of the taxation provided that it is impossible to apply the methods specified in subitem 39.3.1 of Item 39.3 of article 39 of this Code.

During the auction (the public biddings) the price which developed by results of such auction (the public biddings) which obligation of carrying out is provided by the law is considered regular.

If delivery of goods (works, services) is performed based on the forward or futures contract, the regular price is the price which answers the level of market prices of the moment of the conclusion of such contract.

If sale (alienation) of goods, including the property pledged by the borrower for the purpose of providing requirements of the creditor is performed forcibly according to the legislation, the regular price is the price created during such sale";

"14.1.159. the connected persons -  legal entities and/or physical persons, the relations between which can influence conditions or economic results of their activities or activities of persons whom they represent.

In case of recognition of persons connected consider influence which can be performed through possession of one person of corporate laws of other persons according to the agreements signed between them or in the presence of other possibility of one person to influence decisions which are made by other persons. At the same time such influence is considered irrespective of whether it is performed by person directly and independently or jointly with the connected persons who are recognized such in connection therewith the subitem.

The connected persons for the purposes of transfer pricing are recognized:

a) legal entities - if one of such persons directly and/or mediately (through the connected persons) owns corporate laws of the legal entity in the amount of 20 and more percent;

b) physical person and legal entity - if the physical person directly and/or mediately (through the connected persons) owns corporate laws of other legal entity in the amount of 20 and more percent;

c) legal entities - if the same person directly and/or mediately owns corporate laws of such legal entities and the size of share of corporate laws in each legal entity constitutes 20 and more percent;

d) the legal entity and person who has powers on appointment (election) of sole executive body of such legal entity or to purpose (election) of 50 and more percent of structure of its collegiate executive body or the supervisory board;

ґ) legal entities whose sole executive bodies are appointed (are elected) according to the solution of the same face (the owner or the body authorized by it);

e) legal entities at whom 50 and more percent of structure of collegiate executive body or the supervisory board are appointed (are elected) according to the solution of the same face (the owner or the body authorized by it);

e) legal entities at whom 50 and more percent of structure of collegiate executive body and/or the supervisory board make the same physical persons;

є) the legal entity and physical person - in case of implementation of powers of sole executive body of such legal entity by physical person;

g) legal entities at whom powers of sole executive body are performed by the same person;

h) physical persons: the husband (wife), parents (including adoptive parents), children (full age, minor, including adopted), full and not full brothers and sisters, the guardian, the custodian, the child over whom guardianship or care is established.

For physical person the general share of corporate laws of the taxpayer (voices in governing body) which it owns, is determined as share of corporate laws which directly belongs to such physical person, and share of corporate laws which belongs to legal entities who are controlled by such physical person.

If the physical person is recognized the subitem connected with other persons in connection therewith, such persons are recognized connected among themselves";

To add 3) with subitem 14.1.251-1 of such content:

"14.1.251-1. transfer pricing - system of determination of the regular price of goods and/or results of works (services) in the transactions recognized according to article 39 of this Code controlled".

2. State Article 39 in such edition:

"Article 39. Transfer pricing

39.1. Principles of transfer pricing

39.1.1. Tax control behind transfer pricing provides adjustment of the tax liabilities of the taxpayer to the level of the tax liabilities calculated on condition of compliance of commercial and/or financial conditions of controlled transaction to commercial and/or financial conditions which took place during implementation of the comparable transactions provided by this Article which parties are not the connected faces.

39.1.2. Determination of the price during implementation of controlled transactions is carried out by methods, stipulated in Item 39.3 these Articles, for the purpose of check of correctness, completeness of charge and the tax discharge on profit of the companies and the value added tax.

39.1.3. The price for the purposes of the taxation is recognized regular controlled transaction if the central executive body which provides forming and realizes the state tax and customs policy does not prove the return or the taxpayer the price specified in the agreement on mutual approval of the prices during implementation of controlled transactions which procedure for the conclusion is determined by Item 39.6 of this Article and the price specified in such agreement is used it cannot be appealed in the procedure established by this Code.

39.1.4. In case of application by the taxpayer during implementation of controlled transactions of the prices which do not answer the level of the regular prices of the corresponding goods (works, services) and if such discrepancy is resulted by understating of the tax liability, the taxpayer has the right to conduct adjustment of the tax liabilities and paid amounts of tax according to subitem 39.5.4 of this Article independently.

39.2. Controlled transactions

39.2.1. For the purposes of of this Code controlled transactions are:

39.2.1.1. economic activities on acquisition (sale) of goods (works, services) which are carried out by taxpayers with the connected persons - nonresidents;

economic activities on acquisition (sale) of goods (works, services) which are carried out by taxpayers with the connected persons - residents who:

declared negative value of the taxation object on the income tax for the previous tax (reporting) year;

apply special tax regimes condition for the beginning of tax (reporting) year;

pay the income tax of the companies and/or the value added tax at other rate, than basic (main) which is established according to this Code, condition for the beginning of tax (reporting) year;

were not income tax payers of the companies and/or the value added tax condition for the beginning of tax (reporting) year;

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