The case where the transfer pricing method is clearly defined. Vital information for exporters and importers.
Wheat, barley, oats, corn, ore, coal, oil, polypropylene...
If you are an importer or exporter of the mentioned goods, you have to be really careful. To determine whether your controlled transactions are in line with the Arm’s Length Principle, you can use the Comparable Uncontrolled Price Method.
Comparable Uncontrolled Price Method, shortly referred to as the CUP is a cross-functional traditional operating method which is quite transparent and easy to use.
When applying this method, the price of the goods (services) indicated in controlled transaction is compared to the market prices for identical - or homogeneous - goods involved in uncontrolled transactions.
According to the Tax Code of Ukraine, “the list of the goods which have stock quotes and world commodity exchanges for each group of the goods is defined by the Cabinet of Ministers of Ukraine. The price range is calculated according to procedure outlined in Paragraph 4, Subclause 39.3.2.3 of this article based on the stock quotes of the relevant goods for the decade preceding controlled transaction.”
To establish whether controlled transactions are in line with the Arm’s Length Principle, a full list of the goods that have stock quotes is gives in Resolution No.616 approved on September 8, 2016.
Therefore, if controlled transactions - export or import - have stock quotes, the use of comparable uncontrolled price method is mandatory when establishing their compliance with the Arm’s Length Principle.
To avoid any further problems with the State Fiscal Service, you have to factor in the following things:
1. The smaller the difference between comparable transactions, the better.
The prices of transactions with stock quotes can be adjusted when comparing transactions in the market of identical (similar) goods and in case of availability of information on typical bulk discounts.
Please note! In cases where there are too many adjustments for a number of reasons, the courts do not recognize the comparable uncontrolled price method as reliable and relevant.
2. The dates of comparable transactions shall be close to the date of controlled transactions.
If you use stock quotes, information for a decade preceding controlled transaction shall be taken for analysis.
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