Transfer Pricing in Ukraine

The legal framework

Ukrainian transfer pricing is codified in a single article. Article 39 of the Tax Code of Ukraine (Law No. 2755-VI of 2 December 2010) has applied since 1 September 2013 and was recast around the arm's length principle by Law No. 72-VIII of 28 December 2014, displacing the older "ordinary price" concept. Its architecture is easy to hold in mind: 39.1 states the principle, 39.2 defines controlled transactions and comparability, 39.3 the methods, 39.4 reporting and documentation, 39.5 tax control and adjustments, and 39.6 advance pricing arrangements. Clause 39.1.4 carries a limitation worth reading closely - testing is confined to the statutory methods and to verifying that corporate profit tax has been correctly accrued and paid, so a pricing challenge does not travel automatically into other taxes.

Scope turns on two gates. Clause 39.2.1.1 catches transactions with related non-residents, foreign-economic sales and purchases through non-resident commission agents, transactions with non-residents registered in listed jurisdictions or carrying listed legal forms, and dealings between a non-resident and its Ukrainian permanent establishment. Clause 39.2.1.7 then applies the monetary tests: annual income above UAH 150 million and per-counterparty volume above UAH 10 million, both net of indirect taxes and both measured on accounting data. Only the UAH 10 million test applies to non-resident and permanent establishment dealings.

The relatedness definition in clause 14.1.159 reaches well beyond equity. A 25% direct or indirect holding is the headline test, but so is debt: borrowings or repayable financial assistance exceeding equity by more than 3.5 times, or 10 times for financial institutions and leasing companies, measured on the average of opening and closing balances. From 1 January 2025 Law No. 3813-IX added economic dependence - a Ukrainian entity is related to a single non-resident where sales to it reach 75% of sales to all non-residents and those sales are 50% of total sales, with a mirror purchase test. Formally independent counterparties are now caught. The conduit rule in 39.2.1.5 does comparable work where title passes through intermediaries performing no significant functions, using no significant assets and bearing no significant risks.

The OECD Guidelines are persuasive rather than binding. Article 39 contains no cross-reference to them; the State Tax Service describes the 2017 edition as the principal recommendatory-methodological document whose substance has been implemented into the Code. In practice a Ukrainian defence file argues the Code first and the Guidelines in support.

Methods, comparables and benchmarking

Clause 39.3.1 provides all five OECD methods, and clause 39.3.2.1 applies a best-method rule tempered by the residual priority ordering restored by Law No. 1117-IX. Where no comparable uncontrolled transactions exist, clause 39.3.10 permits a discounted cash flow valuation for intangibles, other intellectual property and business restructurings. Ukraine's OECD profile is candid that it does not largely follow Chapter VI, and there is no hard-to-value intangibles regime at all - a gap that leaves valuation disputes to be fought on general comparability grounds.

Commodities are the exception to method freedom. Clause 39.3.3.4 makes CUP mandatory for goods on the Cabinet of Ministers list approved by Resolution No. 1221 of 9 December 2020, tested against genuinely regular uncontrolled transactions with several counterparties in comparable volumes, or against quoted prices adjusted for material differences. The State Tax Service publishes a recommended, non-exclusive list of quoted-price sources before each reporting year, the current edition dated 8 December 2025, and the Ministry of Finance procedure in Order No. 19 of 18 January 2022 has been mandatory since 1 January 2023.

Benchmarking mechanics are unusually prescriptive. A range is compulsory whenever several comparables are used, and the interquartile range and median are computed under Cabinet of Ministers Resolution No. 381 of 4 June 2015 by a rank-based convention - multiply the sample size by 0.25, 0.5 or 0.75 and take the value at that rank. That is not the interpolated percentile a spreadsheet returns, and files built on default Excel quartiles will not reconcile with an auditor's arithmetic. If the tested indicator falls outside the range the authority adjusts to the median, whereas a taxpayer self-adjusting under 39.5.4 moves only to the nearest limit. The difference is a standing argument for moving first.

Comparable screening under 39.3.2.9 is cumulative: functional comparability referenced to the Ukrainian activity classifier KVED DK 009:2010, no losses in more than one period used, and no 25% ownership link in either direction. Multi-year data is permitted but a weighted average must be computed under Resolution No. 191 and the choice justified. The tested party need not be Ukrainian under 39.3.2.7, though the Supreme Court in case No. 817/1737/17 upheld selecting the resident where no public information on the non-resident existed. Secret comparables are barred by 39.5.3.3, and the authority must work from the taxpayer's own sources unless it can prove better comparability elsewhere.

Documentation: what the State Tax Service expects

Ukraine runs the full three-tier model plus two domestic filings. The Report on Controlled Transactions and, for group members, the Notification on participation in an international group are due by 1 October following the reporting year, filed electronically. The Report carries one appendix per counterparty; a new Report may be filed before the deadline and an adjusting Report after it, but clause 39.4.2.1 makes clear that correcting does not extinguish liability under clauses 120.4 and 120.6, and no Report may be filed for a period under documentary audit.

The local file is produced on demand, not filed annually. A request cannot issue before 1 October of the year following the transaction, and the taxpayer then has 30 calendar days. Clause 39.4.6 sets demanding content: ownership and beneficial-ownership mapping, group structure and transfer pricing policy, functional and market analysis, the supply and value chain, and - since Law No. 1117-IX - a justification of economic benefit and business purpose comparing realistically available alternatives. Contracts, amendments, audit reports and any unilateral rulings must be annexed. A follow-up request under 39.4.9 carries its own 30-day clock and the answer becomes part of the documentation.

The master file threshold is group consolidated income of EUR 50 million or more, requested between 12 and 36 months after the group's financial year end and delivered within 90 calendar days. Where a group has several Ukrainian members the authority asks only one, but a missed deadline lets it ask another without releasing the first. Country-by-country reporting applies at EUR 750 million and is due 12 months after the parent's financial year end; with the multilateral competent authority agreement in force for Ukraine from 2024, the first non-parent filings fell due for financial years beginning in 2024, so a calendar-year FY2024 report was due by 31 December 2025.

Two mechanical points cause avoidable failures. Documentation must be in Ukrainian, with translations of foreign-language annexes, although clause 39.4.8 expressly dispenses with notarisation. And Article 39 material must be retained for 2,555 days - seven years - against 1,825 days for ordinary primary accounting records.

Audits, penalties and the enforcement climate

Monitoring under clause 39.5.1.1 is continuous: the authority analyses Reports, documentation, master files, country-by-country data and any other tax information, and may interview the taxpayer's officers while doing so. An arm's length audit follows where documentation has been submitted, where a required filing was missed or defective, or where a proportional adjustment is claimed. Once opened, the audit may run 18 months and be extended by a further 12 where foreign information, expert examination or translation is needed. Litigation over the audit's appointment or subject matter interrupts the clock, which cuts both ways.

Penalties are pegged to the subsistence minimum for an able-bodied person at 1 January of the reporting year - UAH 3,028 for 2025 and UAH 3,328 from 1 January 2026. On the 2026 figure, failing to file the Report costs 300 subsistence minimums, roughly UAH 998,400; failing to file a country-by-country report costs 1,000, roughly UAH 3.3 million. Late filing accrues daily charges under clause 120.6, and undeclared transactions attract 1% of their value capped at 300 subsistence minimums. Paying does not discharge the obligation: continued default beyond 30 days adds a further per-day charge.

The limitation period reflects the complexity of the work - 2,555 days for Article 39 assessments against the general 1,095. Secondary adjustments bite through clause 14.1.49, which treats excess payments to, and understated sales proceeds from, listed non-residents as constructive dividends subject to withholding. Martial law has not suspended enforcement: audits proceed where the safe-conditions test in clause 69.2-2 is met, while clause 69.1 relieves liability where inability to comply is confirmed under Ministry of Finance Order No. 225 and obligations are met within six months of martial law ending. Clause 69.38 additionally relieves self-correction penalties and interest, which explains why UAH 3.7 billion of the UAH 5.2 billion of adjustments made during 2024 came from voluntary Appendix ТЦ self-adjustments rather than assessments.

Dispute resolution and advance certainty

Advance certainty exists but is rationed. Clause 39.6.1 confines advance pricing arrangements to large taxpayers - income above EUR 50 million or budget taxes above EUR 1.5 million over the last four consecutive quarters. Unilateral, bilateral and multilateral forms are available, the term cannot exceed five calendar years under Cabinet of Ministers Resolution No. 1114, and extension for up to five more requires a written request at least five months before expiry. Rollback to the year of conclusion and earlier periods is available provided those periods are not already under, or scheduled for, an arm's length audit. No application fee is prescribed; the taxpayer funds any independent expert. The protection in clause 39.6.2.5 is strong - no additional liabilities, fines or interest on covered transactions - but so is the sanction: breach voids the agreement retroactively from commencement.

Treaty relief runs through Article 108-1, introduced by Law No. 466-IX, with the Ministry of Finance as competent authority. Where MAP follows an audit the application must be filed within 10 working days of the administrative appeal decision, and the taxpayer must simultaneously notify the controlling body; the assessment on the matters raised is then treated as unagreed until MAP concludes. Otherwise the limit is 1,095 calendar days. A domestic corresponding adjustment is available under clause 39.5.5 once the counterparty confirms it has actually adjusted, with the authority obliged to decide within 30 working days - and refusal routes back to MAP.

Domestic litigation matters more than the statutory machinery suggests. The Cassation Administrative Court within the Supreme Court publishes periodic reviews, the most recent covering 2018 to August 2023, organised around controllability, the arm's length principle, reporting and tax control. Its holdings are practically load-bearing: interest on a non-resident loan is a controlled transaction even though not named in the list of transaction types; salary payments to a non-resident employee-shareholder fall outside transfer pricing entirely; and foreign exchange differences count towards the annual income threshold but not the per-counterparty test.

Pillar Two, Amount B and what changes in 2026

Neither of the OECD's newer workstreams has been legislated. As at August 2026 the Tax Code contains no GloBE or domestic minimum top-up tax provisions. The National Revenue Strategy to 2030, approved by Cabinet of Ministers Order No. 1218-r of 27 December 2023, identifies the effect of Pillar Two on existing Ukrainian incentives and commits Ukraine, across 2024 to 2027, to accede to the relevant multilateral convention and prepare a qualified domestic minimum top-up tax harmonised with Directive (EU) 2022/2523. Groups with Ukrainian operations should therefore model top-up tax at parent or intermediate level rather than in Ukraine, while tracking the drafting pipeline.

Amount B is likewise absent. Article 39 prescribes no fixed return for baseline distributors and retains the ordinary best-method rule with the range and median mechanism, so Ukrainian distributors continue to be benchmarked conventionally. Ukraine has nonetheless confirmed it will respect the outcome where a covered jurisdiction applies the simplified and streamlined approach, consistent with the Inclusive Framework political commitment - relevant where a Ukrainian entity is on the other side of a distribution arrangement priced under Amount B abroad.

The concrete 2026 change is procedural. Ministry of Finance Order No. 312 of 12 June 2026, in force from 10 July 2026, amends the Report on Controlled Transactions to add relatedness codes 525 and 526 for the sales and purchase concentration tests. The 2025 Report must use the updated form, though Reports filed before that date remain valid.

How practitioners should respond

Three priorities follow from the 2025 and 2026 changes. First, re-test controllability rather than rolling it forward: the jurisdiction list has been cut from 78 to 46 entries, the legal-forms certificate under clause 39.2.1.2-1 can take a transaction out of scope entirely, and the new concentration tests can pull an unrelated counterparty in. A single reporting year can move in both directions at once.

Second, build the range the way the Code builds it. Rank-based quartiles under Resolution No. 381, cumulative comparable screening under 39.3.2.9, a justified weighted average where multiple years are used, and a documented reason for any information source outside the State Tax Service's published quoted-price list. A benchmarking study that reproduces the statutory arithmetic is far harder to displace than one that is merely defensible in principle.

Third, use the timing asymmetries. Documentation should be complete before any request arrives, because 30 calendar days is not a drafting window. Where an indicator sits outside the range, a self-adjustment under 39.5.4 lands at the nearest limit rather than the median, and filing an adjusting calculation by 1 October disapplies the clause 50.1 underpayment penalty. Given a seven-year limitation period, the cost of moving late compounds for a long time.