Improved control over compliance with the arm's length principle in controlled transactions

We would like to inform you that on February 06, 2024, the Order of the Ministry of Finance dated 07.12.2023 No. 673 came into force, as amended by the Order of the Ministry of Finance dated 27.12.2023 No. 725 (hereinafter - Order No. 673), which amended

- the form of the Report on Controlled Transactions, approved by Order of the Ministry of Finance of Ukraine No. 8 dated January 18, 2016 "On Approval of the Form and Procedure for Preparing the Report on Controlled Transactions" (hereinafter - Order No. 8);

- the form of the Annex TC to the Corporate Profit Tax Return, approved by Order of the Ministry of Finance of Ukraine No. 897 dated October 20, 2015;

- the Procedure for Preparation of the Report on Controlled Transactions approved by Order No. 8.

The Report on Controlled Transactions carried out by taxpayers during the 2023 reporting year must be prepared and submitted to the supervisory authority in the updated form and in accordance with the Procedure approved by Order No. 673.

Clause 46.6 of the Tax Code provides that if tax reporting forms are changed as a result of changes in the taxation rules, until the new forms of declarations (calculations) are determined and become effective for reporting for the tax period following the tax period in which they were published, the forms of declarations (calculations) effective before such determination are valid.

In view of the above, the Reports on Controlled Transactions carried out by taxpayers during the 2023 reporting year, submitted by taxpayers before the entry into force of Order No. 673 and the development of appropriate electronic formats for submitting the Report on Controlled Transactions in the updated form, are considered valid.

In case of submission of an adjusting calculation to the corporate income tax return for the previous tax (reporting) year for the purpose of making an independent adjustment in accordance with Article 39 of the Code or in determining the tax base in accordance with subparagraph 141.9 1.3 of the TCU in case of controlled transactions, if their terms do not comply with the arm's length principle, no later than October 1 of the year following the reporting year, a penalty of three percent of the amount of underpayment shall not be applied (paragraph 50.1 of the TCU).

In the event of an independent adjustment of the price of a controlled transaction and the amount of tax liabilities of the taxpayer made in accordance with subparagraph 39.5.4 of the TCU, the taxpayers will be able to submit the Annex TC to the Corporate Profit Tax Return in an updated form (including in connection with the adjustment of indicators for the tax (reporting) year 2023), starting from 01.07.2024.