​The Government has approved amendments to the Procedure for the preliminary approval of pricing mechanisms in controlled transactions involving funds transfer pricing

7/4/18

Today, the Government has approved amendments to the Procedure for the preliminary approval of pricing mechanisms in controlled transactions. Based on this Procedure, unilateral, bilateral and multilateral contracts are signed for the purpose of funds transfer pricing.

What’s it about?
On December 7, 2017, the Parliament adopted the Law No. 2245-VІІІ to ensure balanced state revenues in 2018. The Law stipulates amendments to the procedure for the signing of contracts on the preliminary pricing coordination.

To adjust the regulations of the Cabinet of Ministers to these amendments, the Ministry of Finance prepared the new version of the Procedure for the preliminary approval of price-setting in controlled transactions.

The Procedure contains, among others, the following regulations:

- submission and processing of requests for the application of the procedure for the preliminary approval of price-setting in controlled transactions;
- list of documents which must be submitted for the preliminary approval of price-setting;
- terms for the termination of the procedure for the preliminary approval of price-setting in controlled transactions;
- amendments to running contracts;
- prolongation of contracts or their premature termination;
- date of entry into force for contracts on the preliminary approval of price-setting in controlled transactions etc.

If the terms of a contract on the preliminary pricing approval are complied with, controlling bodies are not entitled to impose additional taxes and fines on controlled transactions which are subject to this contract.

What’s the benefit?
- reduction of tax risks;
- complicated cases of funds transfer pricing can be settled without disputes;
- reduced tax administration for big tax payers;
- reduced costs for the control over funds transfer pricing;
- prevention of time-consuming and costly procedures related to examinations and court proceedings.

For information:
Preliminary approval of price-setting in controlled transaction is a procedure involving a big tax payer and the State Fiscal Service. In the course of this procedure, criteria are settled to check the compliance of controlled transactions which will be made or have been made by a big tax payer following the arm’s length principle based on a short-term contract (up to 5 years).

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