Press releases – Kreston

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KRESTON GCG PRESS ROOM

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On July 26, Our Head of Financial Investigations and Partner, Artem Kovbel held a regular meeting among the Forensic Committee of the ACSU, which is also headed by him.

The meeting developed plans and initiatives for up to 2018:

  • organization of a roundtable: Forensic – the Most Effective Anti-Fraud Tool;
  • a trip to Las Vegas to attend the ASIS conference (American Society for Industrial Security);
  • implementation of a Corporate Director training course and much more.

As we have already informed, both the ACSB and Forensic Committee includes representatives from the largest financial and industrial transnational corporations that deal with the corporate security in Ukraine and abroad.

Find more information about the ACSB here.

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July 21 marked the solemn closing of the 9th Odesa International Film Festival. On that day, the jury announced a list of the best films in various categories. The international company Kreston GCG examines the accuracy of votes every year by now.

“We would like to express our gratitude to Viktoriia Tihipko, President of the Odesa International Film Festival, for giving us this opportunity to partake in such an important cultural event“, — said the Managing Partner at Kreston GCG Serhii Atamas, who personally headed the team of auditors at the festival — “Organizers managed to recreate this incredible vibe. It is always a pleasure to plunge into the world of truly intellectual cinema”.

Daria Zhuk, a Belorussian director, received one of the main awards at the festival — Grand Prix — for her movie Crystal Swan. 

The best domestic full-length film was Delta by Oleksandr Techynskyi. The best Ukrainian director became Tonia Noiabreva. The jury highly appreciated her work in the Hero of My Times. 

A film by the title Pity became the best international movie. Its director Babis Makridis also won the award in the nomination Best Director. 

Another important achievement for the Ukrainian cinema was the recognition of the Ukrainian movie Home Games as the Best Documentary. 

What we are seeing is the renaissance of Ukrainian cinema”, — says Victoriia Tihipko, President of the Odessa International Film Festival, — “50 movies [made in Ukraine] are released this year against 37 in the previous year”. 

Kreston GCG is proud to have contributed to the development of the national cinema, and we will continue our efforts for the Ukrainian culture to prosper even further.


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On July 18, the Large Taxpayers Office of the State Fiscal Service of Ukraine hosted a seminar for business representatives where the key aspects of transfer pricing reporting were discussed. 

Partner at Kreston GCG Andrey Popov attended this venue and emphasized its top-notch organization, its practical orientation, and the readiness of controllers to have meaningful talks with the business.

Following up on the results of this event, Andrey Popov prepared a list of best recommendations from the State Fiscal Service:

1. Quality of documentation. The availability of duly prepared documentation alone can save a taxpayer from transfer pricing risks. The SFS Audit Department has already initiated around 60 inspections. In many cases, the examination can cover documents for several years, and around 50% of the questions and complaints pertaining to controlled transactions can be resolved after fiscal authorities examine taxpayer’s reports.

2. Quarterly adjustments. The Ministry of Finance and State Fiscal Service have a different outlook on whether one should or should not make quarterly adjustments to the income tax in pursuance of Article 140.5 of the Tax Code of Ukraine (when importing from low-tax jurisdictions or certain incorporation forms). The State Fiscal Service believes it would be more appropriate to make an advance of the budget funds and 30% adjustments on a quarterly basis. From there, a reverse adjustment may be made according to results at the year-end.

We advise preparing the documents on controlled transactions quarterly. Another option is to find an agreement with the consultant that there may be interim transfer pricing documents prepared (quarterly, semi-annual) if required.

3. Relevance. The documents requested by controllers in response to transfer pricing regulations must comply with requirements pertaining to the structure and contents relevant at the time of request rather than at the controlled transaction. In other words, if in 2016 you prepared documents covering the controlled transactions for 2015, and the request came in 2019, then these documents should be updated to meet the newest requirements.

Our clients can rest assured of our transfer pricing deliverables since our support covers the entire period of potential examination on controlled transactions specified in Article 102.1 of the Tax Code (up to 7 years), including the updates to documents when requested.

4. An Advance Pricing Arrangement (APA) can become a very effective tool to minimize tax risks when it comes to controlled transactions. However, the State Fiscal Service currently reviews only one APA application, which has not been agreed yet.

5. Controllability of dividend payments is rather an ambiguous issue. On one hand, dividends do not constitute expenses in the accounting. On the other hand, they still have a certain effect on the financial result. Since contentious issues are unlikely to be always interpreted in favor of the taxpayer, it is recommended to include dividend payments in the report on controlled transactions but prepare no documentation on such dividends.

6. BEPS in Ukraine. Companies should prepare for the BEPS plan (Base Erosion and Profit Shifting) in Ukrainian transfer pricing. More specifically, the changes will pertain to controls over the prices for services obtained by Ukrainian taxpayers from parent companies abroad. To confirm the expenses on such services, a new concept of ‘business purpose’ emerged. To that note, the new revision of Article 39 of the Tax Code of Ukraine is expected to outline a loyal approach to substantiation of the services with low added value. Their margin must not exceed 5%.

7. Control of transactions with entities from low-tax jurisdictions as specified in the Resolution of the Cabinet of Ministers No. 480 as of 4 July 2017. First and foremost, this Resolution touches upon transactions with partnerships in commendam that are very common in Germany (KG), Poland (Sp.K), and other countries. It is important that a confirmation of taxes paid by the founders of partnerships in commendam (whether legal entities or natural persons) will not constitute sufficient basis for recognizing transactions with these partnerships as uncontrolled since the partnerships themselves do not pay the corporate tax in most countries.

It is also possible that the list of incorporation forms specified in Resolution No. 480 will be subject to amendments same as it was with the list of low-tax countries and territories.

In any event, Kreston GCG recommends Ukrainian taxpayers to pay attention to the counterparties they do business with and see if those are mentioned in the Resolution No. 480. The perfect option will be preparing a report and documents on transactions with these counterparties in accordance with Article 39 or seek personal advice from the State Fiscal Service to confirm if the incorporation forms fall under the controlled transaction criteria.

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On July 12, Partner and Head of Financial Investigations at Kreston GCG Artem Kovbel spoke at the Ukrainian Entrepreneurs Union (Ukrainian — SUP). His presentation covered the problems of corporate fraud and the part of forensic methods in their solution.

More specifically, the large- and medium-sized business learned about how fraudsters can be detected in their companies and how stolen assets can be recovered by means of financial investigations.

“Practice shows – both global and Ukrainian – that it is perfectly possible to minimize the losses from fraud, and then it the matter of professionalism of those engaged to conduct financial investigations” — says Artem Kovbel.

At the end of his presentation, Artem shared several case studies from his extensive practice. He also talked about his work in the Association of Corporate Security Professionals.

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On July 11, Partner and Head of Financial Investigations at Kreston GCG Artem Kovbel spoke to the young business owners united under the Young Business Club. In spite of their youth, these were strong market players, whose annual fees ranged from US$ 100 to US$ 500 thousand.

Artem told about the risks of corporate fraud and talked on anti-fraud methods. He also focused on the global fraud statistics, talked about the areas and frequency of fraud, number of assets recovered, recovery processes, etc.

The topic raised huge interest resulting in lively interesting debates and discussions. We are glad that the audience took a liking to our expert’s performance.

We also thank the founders of Young Business Сlub for organizing the event and for giving us this opportunity to speak.

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On June 20, Partner and Head of Financial Investigations at Kreston GCG, Artem Kobel spoke at the Ukrainian Bar Association (UBA). Artem talked about forensic as the most efficient anti-fraud tool. The lawyers and attorneys learned about the methods of fraud investigation and ways to identify corporate fraud.

Special attention was given to forensic case studies based on real investigations conducted by Kreston GCG. This way, the audience was introduced to the methods used in practice and witnessed their efficiency first-hand.

 

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