On 13 May 2014 the Ukrainian Parliament adopted draft Lawof Ukraine No. 4527 On Amending the Tax Code of Ukraine Regarding Improvementof Transfer Pricing (“Bill”).  The Billeases liability of Ukrainian taxpayers for violating transfer pricing rules.

In particular, the Bill provides for the following:

It extends the deadline for submitting transfer pricingreports (“TP Reports”) for the last four months of 2013 from 1 May 2014 to 1October 2014;

It significantly reduces penalties for the violation oftransfer pricing rules as follows:

(a) the penalty for the failure to submit a TP report isdecreased from 5% of the aggregate amount of the controlled transactions thatwere subject to reporting, to 100 times minimum statutory salary (as of today,UAH 121,800.00 (approx. EUR 7,613.00)); and

(b) the penalty for the failure to submit transferpricing documentation pursuant to the request of tax authorities is reducedfrom 100 times minimum statutory salary (as of today, UAH 121,800.00 (approx.EUR 7,613.00)) to 10 times minimal statutory salary (as of today, UAH 12,180.00(approx. EUR 761.00)); and

It extends the application period of symbolic penaltiesof UAH 1 (approx. 6 eurocents) for failure to comply with the transfer pricingrules, until 31 December 2014.

We expect that the Acting President of Ukraine will signthe Bill into the law in the near future.

References: Draft Lawof Ukraine Law of Ukraine No. 4527 On Amending of the Tax Code of UkraineRegarding Improvement of Transfer Pricing.

Authors:

OlexanderMartinenko, Senior Partner, olexander.martinenko@cms-cmck.com

ArtemLukyanov, Lawyer artem.lukyanov@cms-cmck.com