Tax reporting: how not to be mistaken with the new rules

At the end of last year law No. 1797 was correct provisions of the Tax code regarding transfer pricing (TP), aimed at combating tax minimization for export and import transactions. The changes are effective from the beginning of 2017, writes UBR.

The changes only apply to the profit tax of the enterprises — only tax, which is now linked to transfer pricing control. Previously under the control of the TP fell and VAT.

Under TP understand the system of determining the market price of goods (works, services) in transactions, recognized in accordance with article 39 of the TCU controlled.

Criteria reporting

Credit for the tax referred to the increase in the value of the criteriaby which the operations referred to controlled. Two of them:

  • the total annual income of the taxpayer calculated under the rules of the accountancy (increased from 50 million to 150 million UAH);
  • the total annual amount of transactions with one counterparty to a non-resident (increased from UAH 5 million to 10 million UAH).

“In practice it releases in 2017, part of the operations and taxpayers from further control by the GFS, as subthreshold amounts are not that significant on revenues and the risks of tax evasion”, — said the head of Department of methodology of the tax on profit of enterprises of the Department of methodological work on taxation of the state fiscal service of Ukraine Oleksiy Zadorozhniy.

However, for 2016, the report on controlled transactions will still need to submit under the old criteria, i.e., if annual income has exceeded 50 million UAH (excluding VAT) and the annual volume of transactions with one counterparty — 5 million UAH (without VAT).

“Often there were questions on the definition of annual income according to the rules of accounting. It is necessary to take a separate row in the report on financial results for the year. Not worth special show rate differences and the like. It is sufficient to summarize the results of four lines of the report” — said in the GFS.

In addition, in 2017, significantly shifted the timing of the reporting: from 1 may to 1 October. Moreover, these standards apply to the reports for the year 2016. Therefore, they will have more time to prepare documents. Especially those whose headquarters are located abroad and they did not have time till may 1 to get the right information from their parent companies.

However, this exacerbated another problem — a mismatch of time limits for submitting reports on transfer pricing and income tax (deadline March 1, 2017 to declare for 2016). Because the figures in both reports should match each other.

“To address this problem, payers are given the right to file a revised tax return for income tax in the case of independent adjustment of its financial indices in the report transfer pricing. The penalty of 3% of the amount alone accrued liabilities do not have to pay,” — said Alexey ZADOROZHNY.

That’s just a clarification on income tax without penalty can apply only until 1 may, as due to the haste in amending this defect, and has not been fixed in the tax code. The next revision of article 39 of the code, the tax authorities promise to establish a single date of 1 October.

The difference in the deadlines for submission of statements is associated with one more caveat — the provision of additional documentation at the request of the tax authorities. While NK States that so request of the SFS may apply no earlier than 1 may (old date reports). But the reports on transfer pricing companies are now able to take up to 1 October.

“There is nothing to worry since the other norm of article 39 States that to request a document, the inspector may, only on the basis of the report on transfer pricing. Therefore, prior to his filing no documents request will not be”, — said Alexei Zadorozhnyy.

Different lists

Control of TP enter transactions with non-residents from countries a list of which is the Cabinet. In the Tax Code have changed the criteria for determining such countries. In particular, in addition to low-tax jurisdictions, there is risk of the state that is bad to cooperate with the Ukrainian tax authorities for the exchange of information, etc. This may be an additional reason for changes to the list of countries in the middle of the reporting year.

“Before, we recommend payers to take into account transactions with certain countries, while they were in the list, and not for the entire reporting year. Now the account will not change from the moment of entry (exclusion) of countries to the list of CMU, and early next year,” — said in the SFS.

Additionally, Ukraine should receive the list of organizational-legal forms of enterprises, which are often applied to building schemes to minimize taxation. For example, the so-called partnership, llc or llp. About the problems of creating such a list we wrote.

In fact, this new criterion will start to work only after drawing up a Cabinet list of such organizational forms.

“In practice, the company will have to prove to tax authorities that the Contracting party abroad with this form of organization actually pays income tax, and therefore the operation is not subject to the controlled,” said Alexei Zadorozhnyy.

But even if the list of enterprises start to work, for example, from April, they will need to take into account from 1 January to 31 December 2017.

Taxpayers also have had problems with determining market prices of commodities. The list of exchanges is also determined by the Cabinet of Ministers (resolution No. 616 dated September 8, 2016).

“The subjects say that the exchanges are not always reflected trade in live goods and it does not allow them to use and to carry out adjustment calculations”, – said Vyacheslav Logs.

The problem is that when the stock exchange it is necessary to use a so-called first method of calculation (compare the price). If this is not possible, to calculate an indicator of profitability (2nd method).

“We believe that the first method can be used on a General basis, if the item is in the list, but cannot be applied to data exchange. Then the price can be justified using any other open sources of information”, — said Deputy head of the Department of audits transfer pricing audit Department of the SFS Vyacheslav Logs.

Another problem exists with the given forward and futures contracts where the price is fixed much earlier than the payment is. And the stock prices can very different. So in 2017 the standards of the NC allow you to compare the prices of transactions on the basis of forward contracts with prices comparable to forwards and futures that are the closest to the contract date, not the date of actual delivery of the goods. That is, to compare comparable things.

But to avoid manipulation of dates and transactions “retroactively” imposed a kind of fuse on the fact of conclusion of the contract, the payer must notify HFS within 10 days. “The form of such messages has been prepared and will soon be approved by the government”, — assured Igor ZADOROZHNY.