Ukrainian Government approved the List of Traded Commodities for Transfer Pricing Purposes

On 08 of September 2016, the Cabinet of Ministers of Ukraine by Resolution No 616 approved the list of traded commodities for transfer pricing purposes. The approval of the list is very important for the taxpayers trading in the commodities concerned, since the arm's length pricing in these transactions must now be examined on the basis of comparable uncontrolled price (CUP) method.

Since enactment of the revised transfer pricing legislation in 2015, the Tax Code of Ukraine provides for special rules for transactions with traded commodities. These rules require, in particular, application of the CUP method and the prices quoted on commodity exchange in the decade preceding the date of controlled transaction. If the taxpayer uses any method other the CUP method, the taxpayer shall submit to fiscal authority information identifying each related party involved in the supply chain and the profit margin realized by each related party.

The commodities covered by the CMU Resolution No 616 include: agricultural goods (livestock, meat, grains, food, seeds, palm and soybean oil etc.), energy commodities (coal, crude oil, natural gas, gasoline etc.), industrial and precious metals, cotton, rubber and other commodities.

For each commodity group, the CMU Resolution provides for an approved commodity exchange as the information source for comparable prices.

The approved commodity exchanges include:

  • agricultural goods: Chicago Mercantile Exchange (CME), Euronext, Intercontinental Exchange (ІСЕ), New York Mercantile Exchange (NYMEX), National Commodity and Derivatives Exchange (NCDEX), and others;
  • energy commodities: Intercontinental Exchange (ІСЕ), European Energy Exchange (EEX), Chicago Mercantile Exchange (CME), Tokyo Commodity Exchange (TOCOM), European gas hubs (NCG, CEGH, GASPOOL) and others;
  • industrial and precious metals: Intercontinental Exchange (ІСЕ), London Metal Exchange (LME), Dubai Gold and Commodities Exchange (DGCX), Chicago Mercantile Exchange (CME) and others;
  • cotton and rubber: Chicago Mercantile Exchange (CME), Intercontinental Exchange (ІСЕ), Multi Commodity Exchange of India Limited (MCX), Singapore Exchange (SGX), Shanghai Futures Exchange (SHFE) and others.

The approval of the list of traded commodities and commodity exchanges made the special rules relating to transactions with commodities operational. Therefore, the taxpayers trading in commodities covered by the CMU Resolution No 616 should be prepared to comply with these rules when submitting reports and documenting transactions for the year 2016.

 

 

 

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