Transfer Pricing Methods ~ U-Tax Blog

Friday, January 10, 2014

Transfer Pricing Methods

Co-author Anton Babak
(junior associate of Lavrynovych
 and Partners Law Firm)
On September 1, 2013 the amendments to the Tax Code of Ukraine related to transfer pricing entered into force. The said amendments have particularly affected the methods of the computation of an arm’s length price, which thereafter started being referred to as the methods of the computation of a price in controlled transactions (hereinafter – «CTs»).

The list of methods remains unchanged. They are as follows:

- Method of comparable uncontrolled price;
- Resale price method;
- Cost plus method;
- Transaction net margin method;
- Transaction profit split method.

However, with the amendments to the Tax Code of Ukraine the rules for the application of each of the above-mentioned methods have been worded in a much greater detail. Furthermore, there have been introduced some new terms related to the application of the methods. These are such terms as gross margin of costs, net margin, net margin of expenses, etc.

Since September 1, 2013 the hierarchy of the said methods has been in operation. A taxpayer may apply any method, however if there is a possibility to employ the method of comparable uncontrolled price, this particular method must be applied. It is also possible to use several methods simultaneously (i.e. a combination of methods).

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