Transfer Pricing: key trends and case law (Part 2)

Continuing with the main trends in transfer pricing, a significant development for Ukrainian businesses is the increasing necessity of having a non-resident affiliate as an intermediary. This trend, once common only among companies structuring through non-residents, has spread to those simply making foreign purchases. Intermediaries improve efficiency, ensure stable transactions, and offer better terms with foreign partners. However, new companies using this structure face added complexities, including risks related to pricing methods and compliance with counterpart jurisdictions.

Another trend is the growing frequency of transfer pricing audits, even for periods dating back to 2015. This suggests tax authorities prioritize audits within legislative deadlines, and even older periods are revisited under moratorium extensions.

Additionally, many transfer pricing audits focus on raw materials transactions. Common audit challenges include the chosen pricing method, analysis dates, data sources, and adjustments.

Regarding case law, disputes over economic analysis in transfer pricing cases are rising, with external experts frequently involved. The tax authority maintains a firm stance, often resisting pre-trial settlements and pursuing multiple appeals.

Since transfer pricing trends in developed economies are gradually becoming more relevant for Ukraine, taxpayers will likely focus on issues such as Advanced Pricing Agreements (APA), preparation for Pillar 2, and risk analysis within Country-by-Country Reporting (CbCR) shortly.