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Changes in the List of Countries from Low Tax Jurisdictions
Author: Svitlana Domanchuk
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05
August 2018

In order to be sure whether or not a business transaction (BT) is controlled and to avoid incurring transfer pricing penalties, you have to keep track of all updates. Particularly, in 2018 the list of countries from low tax jurisdictions has been updated plenty of times.

For starters, may it be recalled that the Government of Ukraine approved the Resolution No.1045 on December 27, 2017. Pursuant thereto, the list of risky countries in terms of control over transfer pricing grew from 65 to 85 countries.

The following countries have been added:

  •  Guadeloupe;
  • Guatemala;
  • French Guiana;
  • The Commonwealth of Dominica;
  • Dominican Republic;
  • Estonia;
  • Iran;
  • Cuba;
  • Laos;
  •  Latvia;
  • Lebanon;
  • Mauritius;
  • Malta;
  • Morocco;
  • Monaco;
  • UAE;
  • Singapore;
  • Georgia;
  • Hungary.

 

Later on, in accordance with the Resolution No.108 approved by the Cabinet of Ministers of Ukraine and dated January 31, 2018, the following countries have been removed from this list:

  • Georgia;
  • the Republic of Estonia;
  • the Republic of Latvia;
  • the Republic of Malta;
  • Hungary.

 

The aforementioned resolution became effective on March 7, 2018. Thus, business transactions which have been made with non-residents registered in the countries listed above during the time period from January 1, 2018 until March 6, 2018 shall be recognized as controlled provided that the following terms are complied with:

  • taxpayer’s annual income resulting from any business activities and determined according to financial accounting rules exceeds UAH 150 million (excluding implicit taxes) for 2018 tax (reporting) year,
  • volume of taxpayer’s business transactions with such counteragent (determined according to financial accounting rules), exceeds UAH 10 million (excluding implicit taxes).

 

This means that one would still have to report on BTs with non-residents of Georgia, Estonia, Latvia, Malta, and Hungary.

 

You can make use of the removal of the mentioned countries from the list starting from March 7, 2018. However, it makes sense to seek consultation from transfer pricing experts just to be on a safe side.

 

The latest change in the list of risky countries in terms of control over transfer pricing is outlined in a Resolution No.295 passed by the Government on April 11, 2018. Pursuant to it, the Cabinet of Ministers has removed the Republic of Bulgaria from the list of countries (territories), the transactions with the residents of which in the field of transfer pricing are recognized as controlled.

 

Once again, the following change can be used in Controlled Transactions Report and transfer pricing documentation for 2019. Stay alert! The State Fiscal Service shall monitor BTs with the residents of the listed countries within the powers and authority stipulated by law.

 

What is our advice here? In order to avoid having to deal with penalties and litigation, make sure you engage transfer pricing experts in the course of financial reporting. AIM is always at your service. Please feel free to contact us in the way that’s most convenient for you.

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