On 22 September 2017, Larysa Antoshchuk, Manager, Head of Tax Dispute Resolution Group, Oleg Chayka, Director, Tax and Legal, Deal Advisory, M&A Tax, and International Corporate Taxation, and Yevgeniia Marushchenko, Consultant, Transfer Pricing Group, KPMG in Ukraine, spoke at the National Tax Forum "Transfer Pricing. Profit. VAT».
Oleg Chayka gave insight into arising tax risks and tax benefits on interest payable to foreign creditors, as well as presented KPMG's tax solutions that help mitigate the risk of non-recognition of foreign creditors as beneficiary interest owners and recognize interest payable to foreign creditors as tax deductible, notwithstanding the "thin capitalization" regulations.
“It should be stressed that international financial organizations, foreign banks, or even the third parties may be de facto related to the Ukrainian debtors for tax purposes in Ukraine, including transfer pricing rules. Many Ukrainian companies are unaware of the fact that if interest paid to non-residents exceeds prevailing market rates, the tax benefits provided under the double tax treaties are not applicable to the exceeding interests amount. Furthermore, many Ukrainian companies are not aware of KPMG's tax solutions that help mitigate the risk of non-recognition of foreign creditors as beneficiary interest owners and receive tax benefits from non-application of the "thin capitalization" regulations” - Oleg Chayka said.
Larysa Antoshchuk spoke on disputes related to transfer pricing in Ukraine and emphasized that judges, fiscal authorities, and businesses currently learn how to apply the arm’s length principle in a “civilized” way. To illustrate her presentation, Larysa also provided cases of foreign practices. She also introduced certain practical advice to the Ukrainian business derived from such foreign sample cases: in disputable transactions, legislation should be interpreted to demonstrate compliance with the arm’s length principle; the 2,555 day period is not the maximum period for additional tax liabilities accrual (including on transfer pricing), if EU antitrust legislation is applied (it is important considering the European integration legislative initiatives); such disputes should not be handled without involvement of specialists (forensic, transfer pricing), as they require professional judgment and economic substantiation in explaining transfer prices; usage of foreign court rulings helps in justifying application of the arm’s length principle, however, it is important to consider differences in national transfer pricing regulations.
Yevgeniia Marushchenko spoke on transfer pricing documentation and results of survey conducted by KPMG in Ukraine. Based on the survey, most companies are motivated to prepare transfer pricing documentation by fines (42%) and tax compliance regulations (38%). Time spent by companies to prepare transfer pricing documentation varies within 1 month - 2 months (62%), 3 months - 5 months (35%), and over 6 months (3%).
For KPMG in Ukraine, such process takes about 2 months, i.e. 250 hours of consultants’ work, and results in a report containing more than 70 pages.
The National Tax Forum discussed wide range of current issues related to transfer pricing, taxes, and VAT, from tax invoice preparation to transaction verification.