Consultations on TP issues are services aimed at helping clients correctly understand and use transfer pricing norms in their foreign economic activities. This includes determining adequate prices for transactions between related companies, preparing relevant documentation, risk analysis and optimization of tax liabilities. In particular, identification and analysis of the business purpose.
The Tax Code of Ukraine (TCU) defines a reasonable economic reason or, in other words, a business purpose as a reason that can be present only if the taxpayer intends to receive an economic effect from business activity.
The economic effect, in particular, but not exclusively, involves an increase (saving) of the taxpayer’s assets and/or their value and the creation of conditions for such an increase (saving) in the future.
For tax purposes, it is considered that a transaction carried out with non-residents does not have a rational economic reason (business purpose) if:
In the context of tax laws, the concept of business purpose applies to:
in the jurisdictions specified by the Resolution of the CMU No. 1045 dated December 27, 2017, and non-residents who do not pay income tax (corporate tax) by the Resolution of the CMU No. 480 dated July 04, 2017;
To properly substantiate the existence of a business purpose, Kreston Ukraine experts recommend preparing an appropriate evidence base in which to investigate and disclose the goals, intentions and expectations from the implementation of a business transaction, for which:
– prepare documentation to confirm the reality of the transaction,
– prepare documentation to confirm the economic feasibility of the transaction.
