One step closer to BEPS: the Government adopted draft laws No. 1209-1 and No. 1210
Draft laws No. 1209-1 and No. 1210 were adopted by the Verkhovna Rada in the second reading. They are intended to improve tax administration, eliminate inconsistencies in tax legislation, and monitor compliance with the principle of tax justice. The Government states that the implementation of new standards will boost Ukraine’s international standing.
The list of new legal developments regarding the BEPS plan in Ukraine is as follows:
- introduction of the concept of taxation of profits of controlled foreign companies at the level of a controlling entity;
- introduction of a three-level documentation structure for international groups of companies, which includes transfer pricing documentation (local file), global documentation (master file) and country-by-country reporting;
- BEPS Actions 8-10 regarding control over the distribution of functions, risks, and intangible assets within the group were implemented; improvement of the rules for commodity transactions by eliminating the restriction on the use of exchange quotations of certain exchanges only and allowing the use of quoted prices for such commodities;
- the procedure for conducting the mutual agreement procedure was defined; it provides for a mechanism for submitting an application for consideration of a case under the mutual agreement procedure, the requirements for such an application, the procedure of the competent authority, etc.;
- introduction of the concept of taxation equal to dividend payments, which provides for adjustments according to the methodology and procedures provided for control over transfer pricing in transactions with non-residents.
“The draft law is aimed at developing and preserving capital in Ukraine. A new model of financial responsibility is implemented: the taxpayer’s guilt becomes an obligatory element of financial crime. A mechanism of state responsibility for illegal tax violations is established. “The grounds for carrying out an unscheduled business inspection in the framework of criminal proceedings were eliminated,” said Danylo Hetmantsev, Head of the Committee on Finance, Tax and Customs Policy.
The amendments also addressed the issues of personal income tax, corporate income tax, lease payments, etc.
We would emphasize that companies should already analyze the possible impact of the adopted draft laws on the taxation process and prepare for the introduction of new rules. These will minimize tax risks for both organizations and stakeholders.