The State Tax Service (STS) of Ukraine has issued a notice on the impact of martial law on transfer pricing requirements, including amended rules regarding the extension of tax obligation deadlines during the period of martial law.

Filing Obligations

The notice provides an overview of the transfer pricing filing obligations, which include:

• Report on controlled operations and Notification of participation in an international group of companies - due by 1 October 2022 in respect of 2021;
• Documentation on transfer pricing (Local File) – due at the request of the STS within 30 calendar days from the date of receipt of the request;
• Global documentation (Master File) – due at the request of the STS within 90 calendar days from the date of receipt of the request, but may not be requested earlier than 12 months or later than 36 months after the end of the financial year of the taxpayer's group (applied for the first time for financial years ending in 2021); and
• Country-by-Country (CbC) Report –applied for the first time for financial years ending in 2021 but not earlier than the year in which the competent authorities conclude a multilateral agreement on the automatic exchange of CbC reports (Note - Ukraine has not yet concluded a CbC exchange agreement).

In respect of the above, and other tax obligations, the notice includes the following rules regarding extensions as provided by Law No. 2260-IX of 12 May 2022, which entered into force on 27 May 2022:

• Taxpayers that are unable to fulfill their tax obligations in a timely manner have six months after martial law is abolished/terminated to fulfill the obligations (previously, three months after was provided by Law No. 2118-IX of 3 March 2022);
• Taxpayers that are able to timely file are released from liability for late performance of their obligations where the deadline falls in the period 24 February to 26 May 2022, provided that the taxpayer registers their tax (VAT) invoices by 15 July 2022, submits any tax reporting by 20 July 2022, and pays any taxes and levies by 31 July 2022;
• Taxpayers that were unable to fulfil their tax obligations in a timely manner but later become able are released from liability for late performance of their obligations where the deadline falls in the period 24 February 2022 to the date the taxpayer becomes able, in which case the registration of tax invoices, the submission of tax reporting, and the payment of taxes and levies are due within 60 calendar days from the first month after the month in which the taxpayer becomes able.

Whether a taxpayer is able or unable to fulfill their tax obligations will be confirmed through a separate procedure to be approved by the Ministry of Finance.

Statute of Limitations

The notice also addresses the statute of limitations, which is normally 2555 days (7 years) following the deadline for submitting tax declarations and payments or the actual date of submission, if later. It is noted that the statute of limitations had been suspended from 18 March 2020 due to COVID-19 and was further suspended from 15 March 2022 during the period of martial law. As such, it is confirmed that the statute of limitations in terms of control over transfer pricing has been suspended since 18 March 2020.

Tax Audits

With respect to audits, it is noted that tax audits will not be initiated, and ongoing audits are suspended during the period of martial law, with certain exceptions that do not include transfer pricing (i.e., transfer pricing audits are suspended). Further, the time limits (terms) for submitting objections to completed audit acts and for submitting appeals against tax notifications/decisions are also suspended during the period of martial law.

Optional Simplified Tax System

Lastly, the notice addresses transfer pricing in relation to taxpayers that opted for the simplified tax system for Group III at a single tax rate of 2% during the period of martial law. For such taxpayers, it is noted that they will automatically revert to the normal tax regime from the first day of the month following the month in which martial law is abolished/terminated. With respect to transfer pricing, it is provided that in determining whether the income threshold for controlled transactions for transfer pricing is met (UAH 150 million), the taxpayer's annual income is calculated based on any activity for the entire reporting year, including income under the optional simplified tax system. However, transactions carried out by a taxpayer while under the optional simplified tax system are not taken into account in determining whether the UAH 10 million transaction threshold is met for transfer pricing purposes, as long as the transactions do not affect the object of corporate income tax.