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Ukraine Publishes Ministerial Decree Establishing New APA Procedures — Orbitax Tax News & Alerts

Ukraine has published Cabinet of Ministers Decree No. 1114 of 28 October 2021, which establishes new procedures for concluding unilateral, bilateral, and multilateral advance pricing agreements (APAs). Decree No. 1114 will enter into force on 1 January 2022, and replaces the prior decree on APA procedures, Decree No. 504 of 2015 and its amendments.

Decree No. 1114 provides that taxpayers may begin the APA procedure by submitting an application for preliminary consideration of an APA, which involves the submission of an application along with relevant information, including information on the taxpayer, the related parties, the controlled transactions, the transfer pricing method(s), the nature of the proposed APA, etc. The results of the preliminary consideration are to be provided by the tax authority within 60 days of the initial application, which is not binding on the taxpayer.

The actual APA application, which may be submitted without the application for preliminary consideration, includes the submission of more detailed information and documentation. This includes information similar to the preliminary application as well as:

  • Copies of contracts under which controlled transactions are carried out, indicating the supply chain of the goods (works, services) in the controlled transactions;
  • Transfer pricing documentation for the controlled transaction that is the subject of the APA for the reporting (tax) year preceding the year of application, in case of controlled transactions in such reporting (tax) year;
  • Description of ongoing tax disputes relating to the subject of the APA, if any;
  • Description of the impact of an income tax treaty, if applicable;
  • Results of the analysis of the possible impact of the terms of the APA on the amount of tax liabilities of the parties to the controlled transaction;
  • A draft APA; and
  • A copy of the document confirming the authority of the authorized person of the taxpayer that will participate in the APA procedure.

In the case of applications for a bilateral or multilateral APA, additional documentation must be submitted, including:

  • Certification that the non-resident party to the controlled transaction is a resident of a state that has an income tax treaty with Ukraine; and
  • Copies of documents confirming that the counterparty to a controlled transaction has applied for an APA with the relevant foreign tax authority.

Information and documentation submitted must be in the Ukrainian language. If documentation is prepared in a foreign language, a Ukrainian translation must be submitted. In the case of bilateral or multilateral APA application, the tax authority may also request that translations in the relevant foreign language be submitted.

Once an APA application is submitted, the first joint discussion between the taxpayer and the tax authority is to be held within 30 days. In the case of a bilateral or multilateral APA, a request for consultation with the relevant foreign competent authority is to be made within 60 days, with the APA procedure to be handled in accordance with the MAP provisions of the relevant tax treaty and Ukraine law. During the procedure, additional documentation may be requested by the tax authority, additional discussions may be held, inspections may be made, etc.

If approved, APAs may not exceed five calendar years, although an extension for up to five calendar years may be applied for. An APA can apply to the entire tax period in which it was concluded or to tax periods preceding the APA's entry into force if those tax periods are not, and have not been, included in the process of verification of the taxpayer's compliance with the arm's-length principle.

Where a taxpayer concludes an APA, it is obliged to submit an annual report on its implementation, with the form, content, and terms of submission determined by the APA. It is also clarified that the conclusion of an APA does not exempt the taxpayer from drawing up and submitting a report on controlled transactions, notification of participation in an international group of companies, and a CbC report, if applicable. Where required conditions are not met, an APA may be terminated by the tax authority.