Transfer Pricing: from Sources to Sources ~ U-Tax Blog

Thursday, January 9, 2014

Transfer Pricing: from Sources to Sources

Co-author Andriy Kuleba
(junior associate of Lavrynovych and Partners Law Firm)

The Law of Ukraine No. 408-VII «On Amendments to the Tax Code of Ukraine regarding Transfer Pricing» dated July 4, 2013 (hereinafter – the «Law on TP») defines two categories of information sources to be used for determining the price of controlled transactions (hereinafter – «CTs»):

• Officially recognized sources;
• Other sources.

Officially recognized sources. This category includes informational sources on market prices, the list of which has been approved by the Resolution No.866-p of the Cabinet of Ministers of Ukraine dated October 23, 2013.

According to the abovementioned Resolution the officially recognized sources, in their turn, are divided into two following groups: (i) the basic sources and (ii) the auxiliary sources. The latter are used where there is no information on market prices in the basic sources or where the information available in the basic sources is insufficient.

The basic sources include: the monthly newsletter «Review of Prices of Ukrainian and World Commodity Markets», the periodical analytical products «Commodity Monitor. Ukraine» and the «Digest of Commodity Prices on World Markets», the weekly bulletin «Steel Market: Analytics, Forecasts, Scenarios», the official web-site of the Ukrainian Agrarian Exchange and the Bulletin of the Ministry of Revenue and Duties.

The auxiliary sources embrace: the official web-sites of the Ministry of Regional Development and the Ministry of Agrarian Policy.

Other sources. Under the Law on TP these, in particular, include: statistical data of the government authorities and institutions, commodity market quotes; reference prices of specialized business periodicals and publications (including online periodicals and electronic publications), informational programs (software); information on prices and quotes made public in mass media, and other publicly available informational sources.

Such sources as informational programs (software), among which the databases can be reckoned, deserve special attention. For example, the databases the «Ruslana» and the SPARK are widely used in Russia and the CIS, whereas Amadeus is so used in Europe.

One may note the SPARK which is the largest in the CIS corporate database of registered legal entities of Russia, Ukraine, Kazakhstan and other countries. It was created in 2002-2003 by the experts of group of companies «Interfax Group» based on the information of the State Statistics Service of the Russian Federation. The said database uses only publicly available information acquired upon contractual terms from official sources. In Ukraine the SPARK started being actively promoted towards the end of 2012.

Rules for using information sources. Ultimately, a few words have to be said about the general rules for using information sources. Based on the Law on TP, two main rules can be pointed out:

Rule No. 1 – other sources can be used only in case of absence of information in officially recognized sources or where the information available in such sources is insufficient.

Rule No. 2 – in the case that a taxpayer uses officially recognized sources, the Ministry of Revenue and Duties of Ukraine must also use the same officially recognized sources, except where the Ministry has proved that the taxpayer had to use another officially recognized source.

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