The transfer pricing control mechanism and reporting system implementation challenges: Ukrainian experience

Abstract

This paper was presented at the 10th annual WCO PICARD conference (in the frameworks of the “Youth Forum”), 8-10 September 2015 in Baku, the Republic of Republic Azerbaijan. In most countries of the world in order to avoid speculation with prices between related parties and prevention of evasion by businesses from payment of taxes have been developed and approved at the legislative level transfer pricing rules. In 2013, Ukraine made the first steps towards introducing a system of state regulation in the field of transfer pricing. This issue is one of the key in the management of tax risks for international companies, as the volume of intra-group transactions and their diversity is constantly increasing. Actuality of the paper is connected with the fact that the process of transfer pricing control implementation caused by the common use of the transfer pricing mechanism in export-import operations is accompanied by the presence of a number of problematic issues that require investigation and correction. The aim of this work is to study the features of the transfer pricing control process and specific statements of reporting on controlled operations of subjects of foreign economic activity, identify problematic issues and develop proposals. The paper considers the essence of the transfer pricing control mechanism over transfer pricing operations. The authors’ views on peculiarities of this mechanism introduction into the Ukrainian system are expressed; the problems existing in this area are analyzed as well as the recommendations for improving the control mechanism are provided. The current system of reporting on controlled transactions is studied; the disadvantages of the proposed report are described and ways of improving this system are developed. To highlight the chosen subject definite scientific methods of investigation, namely analysis, synthesis, comparison, generalization were used. Such specific methods of economic study as economic-statistical and economic-analytical methods for the preparation of tables and diagrams were applied. We express our gratitude to the organizers and participants of the conference PICARD 2015 for the discussion and expressed views on this subject, which became the basis for writing this paper.