Material prepared by Аndrii Khalaim, Senior Legal Counsel
In 2026, Ukrainian tax practice is demonstrating a qualitative shift in the approach to international tax control. The focus is no longer on the formal correctness of documentation, but on the actual economic substance of transactions. This approach is increasingly reflected in the position of the State Tax Service of Ukraine.
Two individual tax rulings (IPK) are particularly illustrative in this respect:
- 1450/IPK/99-00-24-03-03 dated 13 March 2026 (regarding CFCs)
- 1052/IPK/99-00-21-02-03 dated 24 February 2026 (regarding transfer pricing for the export of raw materials)
Their significance extends beyond individual cases, as they reflect the tax authority’s systematic approach to assessing taxpayers’ behaviour.
CFC reporting: new priorities in tax control
The first set of issues addressed in IPK No. 1450/99‑00‑24‑03‑03 relates to reporting on controlled foreign companies (CFCs). From a formal perspective, the reporting requirements are clearly defined: controlling persons must submit a CFC report together with their annual tax return, and where full financial information is unavailable, an abridged report may be filed, followed by a complete report at a later stage. In practice, the key issue lies in the ability to correct errors in CFC reports that have already been filed.
The tax authority’s position set out in this IPK is clear: current legislation does not provide any mechanism for revoking or invalidating a CFC report or the relevant annex. As a result, any report that has been submitted—regardless of errors or submission for an incorrect reporting period—remains in the tax authorities’ information system and is taken into consideration in subsequent analyses. In such circumstances, the only options available to taxpayers are to provide explanations through electronic services or directly to the tax authority and to subsequently adjust the reported figures by filing amended tax returns.
This approach has far‑reaching implications that go well beyond merely limiting a taxpayer’s technical options. It effectively reshapes the very concept of tax compliance in CFC reporting. While reporting errors were previously often perceived as issues that could be corrected without material consequences, any inaccuracy is now treated as a potential tax risk. Given that CFC information is used by tax authorities for comprehensive analysis of a taxpayer’s activities—including international structures and sources of income—even purely technical errors may influence the subsequent assessment of tax liabilities.
Transfer pricing in 2026: priority of economic substance
The second set of issues addressed in IPK No. 1052/99‑00‑21‑02‑03 relates to transfer pricing in transactions involving raw materials. In this case, the tax authority clearly prioritises the economic substance of transactions over their formal documentary framework.
A key element in such transactions is the notification of the contact conclusion, which is submitted by the taxpayer. It confirms that the material terms of the contract, particularly the price, were agreed by the parties at the time of its conclusion. Provided that the information in the notification corresponds to the actual circumstances of the transaction, the taxpayer is entitled to use the date of the contract’s conclusion as the basis for comparing the price of the controlled transaction with market indicators.
The IPK clearly delineates the circumstances in which this approach does not apply. Where no notification has been submitted, where the information contained in the notification does not reflect the actual terms of the transaction, where the parties amend the material terms of the contract, or where the parties’ conduct itself is inconsistent with the declared terms, the tax authority adjusts its analytical approach.
In such cases, the decisive reference point becomes the date of transfer of ownership of the goods or the date of their shipment, and it is against this date that the transaction price is compared with market indicators.
This approach is of fundamental importance, as it effectively deprives taxpayers of the ability to formally secure a favourable price at an early stage of a transaction where the subsequent conduct of the parties does not correspond to the declared terms. Moreover, the tax authority explicitly states that, in the event of any inconsistency between the contractual terms and the actual circumstances of the transaction, the decisive factors for transfer pricing purposes are the parties’ actual conduct, the assets employed, and the allocation of risks. This approach fully aligns with international practice in applying the arm’s length principle, under which the analysis of functions, assets, and risks plays a determinative role.
New model of tax control in Ukraine
Summarising the approaches set out in IPKs No. 1450/99‑00‑24‑03‑03 and No. 1052/99‑00‑21‑02‑03, it is possible to conclude that a new model of tax control is taking shape in Ukraine. This model is based on an in‑depth analysis of taxpayers’ activities, the cross‑checking of multiple sources of information, and an assessment of the economic substance of transactions. In this context, any discrepancies between formal documentation and actual business activities cease to be a mere formality and instead become a source of tax risk.
Accordingly, businesses are compelled to adapt to the new rules of the game. Tax compliance can no longer be limited to the proper drafting of documentation or the formal observance of procedures. Instead, it requires a systemic approach that ensures consistency across all elements of business operations—from the structure of international business to the actual terms under which transactions are carried out. It is precisely such consistency that becomes the key prerequisite for minimising tax risks in today’s regulatory environment.
By working with BDO in Ukraine, you receive comprehensive support on transfer pricing and CFC matters. Our professionals help businesses confidently navigate complex tax requirements, mitigate risks, and ensure compliance with modern international tax standards.
Should you require additional guidance or professional assistance, please feel free to contact us.
