PM: Law on transfer pricing must come in force this year

A bill on improvement of tax control over transfer pricing, which the Government submits to the Parliament, is due to take effect this year. "Taxation of profits of large companies by 2015 should be held based on this law," Prime Minister of Ukraine Arseniy Yatsenyuk stressed at a Government meeting on Wednesday, December 17.

He emphasized that the law on transfer pricing would afford to obtain the taxes for the state’s purposes “not basing on undercharge, but on a real price of goods". He noted that a scheme is in effect, "For instance ore, which costs USD 100 on the stock exchange market, is sold to an offshore company at USD 50, but as an offshore company in turn sells it at USD 100, no taxes are paid".

After the law comes into force, "no matter how many offshore companies are in the chain, there is a stock market price of the goods, thus, Ukraine will get relevant taxes not based on undercharge but on a real price, which must correspond to the market and stock price", Arseniy Yatsenyuk was quoted as saying.

According to the PM, the corresponding law will apply to each financial transaction, "Those coming with the purview of the law will be also chemical and metallurgical enterprises. It will be impossible to hide incomes in offshore companies and abroad."

"I address the entire big business to get ready to file fair and open tax reports for 2015 regarding taxation of a profit tax," said Arseniy Yatsenyuk.

He informed that under the State Fiscal Service there will be established a transfer pricing control department, "We receive a technical assistance from our Western partners to verify whether the price at which they sell corresponds to the world price, and also in order to help Ukraine’s big business to pay taxes honestly and fairly, as also to keep track of all financial transactions, wherever they are carried out, no matter which country and which company is involved in this process".

"If we say that people must save, it means those must pay who are obliged to pay - big business. This principle of social justice in tax area is advocated by the new Ukrainian Government," added the Prime Minister.