January opens a season of new legislative adjustments

January opens a season of new legislative adjustments. When all feasts are behind, it is now time to roll up the sleeves and immerse oneself into the business routine. So, what are some of the key updates that have been made to Ukrainian law and are coming to force starting from 1 January 2019?

The sphere of the tax law has always been a place of the ongoing shake-ups. This year is not an exception. There are several changes introduced to taxation rules previously adopted by the Ukrainian parliament (Law No 2628, dated 23 November 2018), the majority of which come into legal force starting from 1 January 2019. The main changes in the application of transfer pricing rules concern the elimination of currently existing inaccuracies and some technical mistakes.

Starting from 1 January 2019 a principle for transfer pricing purposes – “substance-over-form” – has been introduced. Now the actual substance shall prevail over the documented form. It is the actions of the involved parties and the background circumstances that now characterize the controlled operation. The comparability criteria of commercial and/or financial conditions for assets and intangible assets used in the comparable transactions was also amended.

Thus, when comparing controlled and comparable transactions, one shall take into consideration the type (production equipment, intangible assets, financial assets, etc.) and the nature of assets (age, location, market value, availability of protection rights, etc.) used to carry out such transactions.

Moreover, when estimating the influence of the intangible assets on the conditions of controlled and comparable transactions, the following aspects shall be noted: legal ownership of such assets and contractual terms of their use; characteristics of intangible assets (exclusivity, degree and duration of legal protection, geographical scope, usable life expectance, stage of development, etc.); contractual and actual activities of the parties related to the development, improvement, support, protection and exploitation of such assets.

There is a concern among the legal experts the “substance-over-form” principle could be ambiguously interpreted by the tax authorities, which, in turn, may trigger a new wave of tax disputes. Therefore, all aspects introduced by the local legislation for the controlled transactions as well as the implementation of the “substance-over-form” principle shall be thoroughly examined and properly documented when conducting business in Ukraine. Moore Stephens–Kyiv team is ready to provide its clients with up-to-date solutions and help prudently apply the legislative changes. Reap the fruits of our well-made tax planning strategies in the form of profit, investment and success for your business. To learn more about how Moore team can be of service to you, please follow the link: http://www.moorestephens.ua/services/tax?lang=en-gb