Legal regulation of procedure for advance pricing agreements in Ukraine

• Author: Pavlo Selezen, Igor Hrytsiuk
• Pages: 480-491

Legal regulation of procedure for advance pricing agreements

in Ukraine

Senior researcher Pavlo SELEZEN1

Associate professor Igor HRYTSIUK2

Abstract

Advance pricing agreements (APAs) are globally widespread as an instrument of

providing the balance of interests between bona fide taxpayers and fiscal authorities.

Ukraine has attempted to use such instrument since the introduction of the transfer pricing

control. Nevertheless, no APA has yet been concluded in Ukraine. The a uthors use methods

of comparative legal analysis, historical analysis and legal modelling to describe the

evolution of the normative regulation of the procedure for APAs and reveal the factors which

have impacted on the attractiveness of APAs for taxpayers. There are also a few propositions

on improvement of the procedure for APAs in Ukraine, which are formulated on the basis of

best practices of developed an d developing countries. Proposed changes concern the

opportunity to revise APAs, the introduction of special features in the procedure for APAs

in case of their bi- or multilateral character and the alignment of the access to the procedure

for APAs in Ukraine.

Keywords: transfer pricing; advance pricing agreements; taxpayers’ rights; taxation;

legal regulation; tax law.

JEL Classification: K34; H25

1. Introduction

Excess tax losses from transfer pricing in Ukraine determine the necessity to

avoid them. The national legislator made the first step in 2010. The next one was

made in 2013 when sufficient changes were introduced in the Tax Code of Ukraine.

They obliged the taxpayers to follow the arm’s length principle in controlled

transactions with related persons. The calculations revealed that the loss from tax

avoidance via transfer pricing amounts to UAH 20–25 billion per year at that time3.

The permanent process of making changes in tax legislation has turned the

application of arm’s length principle into arduous and complex task both for fiscal

authorities and taxpayers that generates a lot of long-term disputes with uncertain

consequences. In this situation, advance pricing agreements (APAs) might help to

avoid conflict between fiscal authorities and taxpayers in advance that is approved

1 Pavlo Selezen - Cand idate of legal sciences; senior researcher, Research Institute of Fiscal Policy,

University of State Fiscal Service of Ukraine, Ukraine, pselezen@i.ua.

2 Igor Hrytsiuk - Candidate of legal sciences; associate professor, Institute of Law, University of State

Fiscal Service of Ukraine, Ukraine, nnipravo@ukr.net.

3 Cherevko, Olga Igorivna, Transfertne tsinoutvorennya: teoretychni aspekty ta praktyche

zastosuvannya [Transfer Pricing; Theoretical Aspects and Practical Application], „Ekonomika ta

Upravlinnya Pidpryiemstvom” [ „Economics and Management of Enterprises”], 2014, Vol. 2(45),

p. 91.