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Messenger Changes in the Tax Code Will Replace Ordinary Prices with Fair Market Prices
The draft law was developed in implementation of the recently adopted Law on transfer pricing, which provided for the submission to the Verkhovna Rada of a bill on the use of the term “ordinary price”.
A draft of amendments to the Tax Code of Ukraine regarding the use of the term “ordinary price” has been published
The draft law was developed in implementation of the recently adopted Law on transfer pricing, which provided for the submission to the Verkhovna Rada of a bill on the use of the term “ordinary price”.
The draft law provides for a review of the cases of application of the term “ordinary price” in the provisions of the Tax Code of Ukraine where it is used, in particular in Sections III – V “Corporate Income Tax”, “Personal Income Tax” , “Value Added Tax” respectively, which was introduced on September 1, 2013 by the Law of Ukraine No. 408-VII of 04.07.2013 “On Amendments to the Tax Code of Ukraine regarding transfer pricing”.
Among other things, the bill introduces the concept of fair market price – the price formed in the market for identical (or, in their absence, homogeneous) goods (works, services) at which goods are transferred (works are performed, services are provided) in transactions between parties that are not related.
Fair market prices will need to be adhered to in certain cases that previously required the application of ordinary prices:
- Cost of goods, works, services gratuitously received by the taxpayer is included in other income;
- Recognition of the concessionaire’s income as the value of fixed assets that the taxpayer receives from the concession grantor;
- Maximum threshold for the value of fixed assets contributed to the authorized capital;
- Determination of the depreciation value of real estate acquired together with land;
- Recognition of proceeds from the sale (other disposal) of land;
- Cost of dividend payments in non-cash form for calculating the advance payment;
- Recognition of the initial cost of fixed assets received in exchange for dissimilar objects, etc.