AIM
3 Sholudenka st., office 310 04116 Kyiv, Ukraine
+380442909435 info@aimarketing.info
Logo AIM
What you should know about stock quotes when preparing transfer pricing documentation
Author: Yuriy Shchyrin
Views: 47
Rate this page
0
19
September 2018

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.

***

One article cannot possibly cover every aspect and hidden pitfall that one may face in the course of TP documentation preparation. The Agency of Industrial Marketing has a long-term experience in this area and will be happy to answer all of your questions.

Use the chance to get expert assistance! 

Rate this page
0
Liked it Share in social networks:
Do you need professional help? Our experts will help you!
All Posts
HOW TO CORRECT ERRORS IN CONTROLLED TRANSACTIONS REPORT?
HOW TO CORRECT ERRORS IN CONTROLLED TRANSACTIONS REPORT?
Read
Changes in the List of Countries from Low Tax Jurisdictions
Changes in the list of countries from low tax jurisdictions. Stay tuned!
Read
Transfer Pricing Penalties - 2018
What are the PENALTIES for the failure to submit or untimely/incomplete submission of Controlled Transactions...
Read
How to Avoid Getting Dragged into Litigation with the Tax Authorities Due to the Transfer...
How to Avoid Getting Dragged into Litigation with the Tax Authorities Due to the Transfer Pricing? The help of...
Read
Comparison Methods in Transfer Pricing
Comparison Methods in Transfer Pricing
Read
Who Is Required to Submit Controlled Transactions Report and Prepare Transfer Pricing Docu...
Who Is Required to Submit Controlled Transactions Report and Prepare Transfer Pricing Documentation?
Read
How to avoid pain in the neck triggered by 2017 transfer pricing?
How to avoid pain in the neck triggered by 2017 transfer pricing?
Read