The need to submit a report on controlled transactions

Taxpayers who carry out controlled transactions should remember the need to submit a report on controlled transactions by October 1 of the following year for the reporting period .

Controlled operations include transactions that may affect the financial result of the enterprise, and which occur with :

• non-residents from countries with a low level of taxation from List #1045 ;
• non-residents having an organizational and legal form from List No. 480 ;
• non-residents and their permanent representative offices in Ukraine;
• related non-residents;
• non-resident commissioners.

In order to recognize transactions as controlled, their volume must exceed UAH 10,000,000 with each non-resident, and the total annual income of the enterprise must exceed UAH 150,000,000. Both of these indicators should be achieved simultaneously .

In addition, if the enterprise belongs to an international group of companies, it is obliged to submit a Notice of participation in an international group of companies by the same date — October 1. We remind you that a member of an international group of companies is a legal entity or other organization that is part of a group of companies operating in several countries. An international group of companies consists of a parent company (main) and other companies that may be its subsidiaries or affiliated structures in different jurisdictions.

The main characteristics of the international group of companies:

• Global presence : companies that are part of the group are registered and do business in two or more countries.
• Common management or control : A group is under a single management or controlled by a single parent company.
• Financial reporting : international groups are often required to submit consolidated financial statements in accordance with the legal requirements of the country where the parent company is located.
• Transfer pricing : international groups must follow the arm's length principle when conducting transactions between affiliated structures in different countries to avoid price manipulation to reduce tax liabilities.

In Ukraine, companies that are part of an international group are required to submit a Notice of Participation in an International Group of Companies .

According to the Tax Code of Ukraine (subclause 39.4.2 of clause 39.4 of Article 39) , the Report and Notification are submitted in electronic form in compliance with the requirements of the laws of Ukraine regarding electronic document management. To correctly fill out these documents, it is recommended to use the appropriate procedures for their preparation, approved by the tax authorities.

For non-submission or late submission of the Report or Notice, as well as for errors in them, penalties are provided in accordance with Article 120 of the Tax Code . In particular, a fine of UAH 805,200 is imposed for failure to submit the Report on the Administrative Committee for 2023, and UAH 134,200 for failure to submit the Notification of the MGC.

What is the responsibility?

In view of the martial law, temporary special conditions of prosecution apply. If the enterprise did not have the opportunity to submit reports in a timely manner, it is released from responsibility on the condition that reports are submitted within 6 months after the end of martial law .

If the taxpayer independently discovered errors in the reports already submitted before October 1, he can submit a new Report or Notice. If errors are detected after the submission deadline, it is possible to submit a clarifying report.

We would like to remind you that tax control in compliance with the "arm's length" principle is carried out through monitoring and inspections. Taxpayers should check whether there were controlled transactions in 2023 and submit relevant reports in a timely manner. In addition, taxpayers have the right to independently adjust prices and tax obligations for controlled transactions, provided that this does not lead to a decrease in the amount of income tax that must be paid to the budget .

Temporarily, from August 1, 2023 until the end of martial law, upon self-correction of errors that understate the tax liability, taxpayers are exempted from fines and penalties, subject to compliance with the procedure established by Article 50 of the Code .

Thus, taxpayers can adjust their tax liabilities for 2023 and earlier periods without incurring penalties and interest.

In view of the above, we recommend that you seek the help of lawyers to avoid violations of tax legislation, as they help to correctly interpret complex legal regulations and avoid fines. Tax lawyers provide advice on tax optimization, correct reporting and compliance of the company's activities with current regulations . This allows you to reduce the risks of financial sanctions, legal conflicts with tax authorities and preserve the reputation of the business.

Primary source:

- Central interregional administration of the DPS for work with large taxpayers ( https://cvp.tax.gov.ua/media-ark/news-ark/750767.html )