TRANSFER PRICING
Transfer pricing is relevant when an owner or director of a Ukrainian company enters into significant transactions with certain non-residents, related parties or permanent establishments. The central question is straightforward: does the price correspond to terms that independent parties would have agreed?
For 2026, the accountant and tax consultant review counterparties, annual amounts and the effect of transactions on corporate income tax before annual reporting is prepared.
When a Transaction Falls Within Transfer-Pricing Rules
Under the general rule in Article 39 of the Tax Code, both value thresholds must be met: the taxpayer's annual income exceeds UAH 150 million excluding indirect taxes, and the volume of business transactions with the relevant counterparty exceeds UAH 10 million. A separate threshold of more than UAH 10 million applies to transactions between a non-resident and its permanent establishment in Ukraine. The accountant takes these figures from the records for the entire reporting year.
The owner also identifies the parties to the transactions. Relevant categories include related non-residents, counterparties falling within categories specified by the Tax Code, certain organisational and legal forms of non-residents and other cases expressly provided by law. An equity interest is only one criterion of relatedness. The tax consultant also considers indirect ownership and actual influence where those circumstances are relevant under the current version of the Code.
For the business owner, this affects both the tax amount and reporting obligations. If a transaction meets the criteria for a controlled transaction, management needs the agreement, invoices, primary documents, accounting data and information about the parties. The earlier these materials are aligned with the actual business terms, the easier it is to support the price after year-end.
If the ownership structure or terms of a major agreement change during the year, the owner informs the accountant and tax consultant. The same transaction may be assessed differently depending on the parties and circumstances of the particular year. Information on the non-resident, amount, subject matter and relationship between the parties should therefore be updated as soon as a change occurs, while the reporting year is still in progress.
How to Support the Price and Calculate a Tax Adjustment
The arm's length principle requires the terms of a controlled transaction to correspond to terms that would apply between independent parties. To assess the price, the tax consultant considers who performs the key functions, owns the assets, finances inventory, works with customers and bears commercial risks. The agreement should reflect what the parties actually do and what they are paid for.
The Tax Code provides several methods for testing whether a price is arm's length. The choice depends on the goods or services, the parties' roles and the availability of comparable data. In some cases the basis is the price of comparable goods; in others it is gross or net profitability. The consultant explains why the selected method is appropriate to the particular transaction and which sources support the calculation.
If the indicator falls outside the permitted range, the owner can assess a self-adjustment within the rules of the Code. This decision is made using final year-end data, so the accountant must separate actual revenue, expenses and payments from forecasts. Management sees the potential adjustment before reporting is filed and before any possible request from the tax authority.
For commodity transactions, the market, shipment size, delivery terms, currency, quality and transport conditions may be relevant. For services, the nature of the work, qualifications of the providers and the parties' responsibilities may be relevant. The tax consultant selects comparable data taking these differences into account, and the owner receives an explanation of which conditions affected the price calculation.
Reporting, Documentation and Defence of the Position
A taxpayer with controlled transactions complies with the reporting obligations in the cases and within the deadlines established by the Tax Code. Supporting the price requires information on the group structure, activities of the parties, substance of the transaction, functions, assets, risks, selected method, comparable data and financial calculations. Management needs a package in which the figures agree with the agreements and accounting records.
Management should maintain a separate list of controlled transactions showing the counterparty, country, subject matter, amount, currency, agreement and responsible employees. This preserves the information needed for reporting or a response to a request throughout the year. The accountant adds actual turnover figures, while management can see material changes to transaction terms.
UBC can review the scope of controlled transactions, prepare calculations and documentation or assist with a specific State Tax Service request. The owner provides a list of non-residents, amounts and principal agreements and receives a conclusion on obligations and scope of work. The fee depends on the number of counterparties, transaction types, countries and the condition of the accounting data.
The owner can also use transfer-pricing materials for group management: they show which company earns from sales, who finances assets and where the principal risks remain. If the actual allocation of profit differs from the parties' roles, it is worth assessing before a new major transaction. In this way, tax control is combined with sound management of an international business.
Need support or a specialist in your region?
For an initial assessment, a list of non-residents, countries, annual amounts and principal agreements is sufficient. A UBC specialist will explain which transactions require separate review and, where necessary, propose a vetted specialist in your region.
Transfer pricing is best assessed before year-end, while agreements, accounting records and calculations can still be clarified. UBC will help the owner determine the obligations, prepare documentation and defend the tax position. We will be pleased to answer further questions. We wish you every success in business!
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Why is it better to start a business in Ukraine with UBC? The answer is simple: we have substantially more experience, resources and capabilities.
Frequently Asked Questions
What are the two value thresholds?
Under the general rule, annual income above UAH 150 million and transactions with the relevant counterparty above UAH 10 million, excluding indirect taxes, are tested.
Is it enough to check the ownership percentage?
Ownership percentage is one criterion. The Tax Code also takes into account indirect ownership and other indicators of relatedness provided by law.
What should the documentation support?
The documentation should link the transaction terms to the parties' actual functions, the selected method, comparable data and financial indicators.
Can I order only a review of which transactions are controlled?
Yes. The owner can order a separate review of counterparties and annual amounts to understand which transactions create reporting obligations.
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