June 09, 2020
The webinar “Opinions of experts regarding the Law No. 466” organized by the German-Ukrainian Chamber of Industry and Commerce was held on June 5, 2020. Alexander Minin, Senior Partner at , and Ivan Shynkarenko, Partner, were among the speakers of the webinar.
Alexander Minin, within his report on issues of brining taxpayers to responsibility according to new Law No. 466, spoke about shortcomings of the Law and negative moments that would significantly complicate the defense of taxpayers’ rights. In particular, one of the major concerns is the implementation of taxpayer’s responsibility only for the presence of guilt without proving it, which does not comply neither with Ukrainian legislation nor international agreements of Ukraine. The same problem is about the introduction of the definition of “intention” as far as the amended Tax Code does not specify exactly how guilt or intention should be proved, but simply imposes obligation of proving on controlling authorities. Alexander gave an interesting example of imperfect legal technique of the Law, that is the imposition of penalties in the amount of 2% of the volume of supply, in particular when supplying goods, but according to the Tax Code “the volume” is a quantity indicator. “While following the ECHR practice if the law is unclear, there is no law at all” – noted Alexander. Please find more information about the Law No. 466 from the viewpoint of administrative liability in the blog of Alexander Minin by the link.
Ivan Shynkarenko in his speech focused on changes in Transfer Pricing rules introduced by the Law No. 466. As Ivan has explained these changes are quite large-scaled that is why he outlined top-3, which, in his opinion, will have the greatest impact on business and consulting area. Firstly, it is the updated requirements for reporting and documentation of operations for multinational groups. Now the Transfer Pricing documentation has three-tiered structure. Ivan elaborated on each of the reporting documents, pointing the deadlines for submission, to whom new requirements shall be applied and, of course, the liability for violating these requirements, which is significant enough. The second important block of changes is related to the constructive dividends in Transfer Pricing sphere. According to new changes any Transfer Pricing adjustment will be considered as dividends for tax purposes. Ivan notices that there are a lot of ambiguities in the Law exactly regarding this issue which may have negative consequences. The third block of changes is related to economic efficiency in Transfer Pricing documentation. The Law envisages a new adjustment: by the amount of the expenses incurred by the taxpayer when conducting operations with non-residents, if such operations do not have business purpose. The burden of proof of the circumstances, envisaged by this subparagraph, is placed upon the controlling authorities. But only time will tell whether this burden is really placed on tax authorities.