Ukraine

Market overview

The Ukraine Ministry of Finance announced at the end of 2015 changes to the transfer pricing rules, as part of broader tax reforms. Most of these changes related to the implementation of the OECD's BEPS Project into Ukrainian law. The proposed amendments include the requirements for transfer pricing documentation and country-by-country reporting (CbCR).

Although BEPS has been firmly on the Ukrainian tax agenda, it has been unclear about whether the country will follow its Eastern neighbour, Russia's Ukraine approach or stick to the European-backed OECD recommendations. From advisers' observations, and the announcement from the Ministry of Finance, is moving more towards an EU approach.

Transfer pricing was introduced in Ukraine in 2013 and remains a very hot topic. Taxpayers are seeking more compliance advice to prepare for the proposed amendments and are waiting for the implementations expected to take place next year.

"So far BEPS has only affected advisers in terms of publishing articles and speaking at events," said Serhiy Verlanov, head of tax and transfer pricing at Sayenko Kharenko.

The Ukrainian economy has been struggling but the gross domestic product (GDP) is expected to return to growth this year after two years of contractions. The local currency remains weak and investors are not interested, although there has been an increased interest in infrastructure projects by investors from Turkey and Saudi Arabia who are 'ready to play by Ukrainian rules'. Advisers expect inbound investments to start later this year as President Petro Poroshenko now leads the government and parliament. "This control has been cemented and it looks like he has all the power now to proceed with the reforms. That's why, from this point of view, we are opening a new page and a new environment of Ukraine," said Kharenko.

Advisers report that there have been very few TP audits and the tax authorities are looking for substance and whether transactions should be filed or not. For years the authorities have been said to be aggressive and this has not changed. "They've been quite aggressive for a number of years already so I don't think it's getting any better than last year, I cannot say that it is getting any worse. They are evenly aggressive. They are aggressive and business feels the pressure," Svitlana Musienko, head of tax and transfer pricing at DLA Piper Ukraine.


Tax authorities

State Tax Administration
Postal address: 8 Lvivska Square, 04655, Kiev – 53
Tel: +38 44 272 44 02; +38 44 272 51 59; +38 44 272 08 41
Fax: +38 44 272 08 41
Email: kabmin_doc@sta.gov.ua
Website: www.sta.gov.ua


Tax rates at a glance

(As of April 2016)

Corporate income tax 18% (a)
Capital gains tax 18%
Branch tax 18%
 
Withholding tax
Dividends 15%
Interest 15% (b)
Royalties 15%
Branch remittance tax n.a.
 
Net operating losses (years)
Carryback 0
Carryforward Unlimited

  1. Special tax rates exist for insurance companies.
  2. The following interest is exempt from withholding tax:
    • Interest and income (discounts) received by nonresidents from state securities, municipal bonds or debt securities if these instruments are secured by state or municipal guarantees and if they are sold or placed by nonresidents outside Ukraine through nonresident authorized agents
    • Interest payments to nonresidents on loans received by the state or to a municipal budget if they are reflected in the state or municipal budget or in the budget of the National Bank of Ukraine
    • Interest on loans obtained by business entities if fulfillment of these loans is secured by state or municipal guarantees

Source: EY 2016 Worldwide Corporate Tax Guide


Firm contact details

WTS Tax Legal Consulting