Legal regulation of procedure for advance pricing agreements in Ukraine

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

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 authors use methods of comparative legal analysis, historical analysis... (see full summary)

 
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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; taxpayersrights; 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 2025 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.

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