Serhiy Verlanov
The official says the exchange of tax information with foreign competent authorities, access to price databases, and employees' skills help to improve the control.
Chairman of Ukraine's State Tax Service (STS) Serhiy Verlanov says the Cabinet of Ministers, headed by Prime Minister Oleksiy Honcharuk, in close cooperation with the Verkhovna Rada, Ukraine's parliament, is actively working to block tax evasion schemes using low-tax jurisdictions, while the STS is stepping up control over the repatriation of non-residents' income from Ukraine.
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"The STS has all resources for high-quality control over transactions with low tax jurisdictions," he said an international practical conference, entitled "Anti-offshore Ukraine," organized by the Ukrainian Chamber of Commerce and Industry on December 16.
In particular, he mentioned the exchange of tax information with foreign competent authorities, access to price databases, and the professionalism of employees who are constantly improving their skills.
"As of now, protocols have been ratified with Switzerland, Great Britain, and Cyprus, which are the most popular with Ukrainian businesses for the withdrawal of income abroad, given the reduced or zero tax rates for passive income. Such schemes will simply become unprofitable, while the national budget will receive hundreds of millions of hryvnias," the official said.
Verlanov added that the tax authorities are waiting for the implementation of standards of the Action Plan to combat base erosion and profit shifting (BEPS), an important tool for fair business taxation.
"Our task is to counteract the withdrawal of income offshore," he said.
According Verlanov, the tax authorities received 2,000 reports on controlled transactions worth UAH 1.5 trillion (US$63.9 billion) within transfer pricing by 2017. However, the number of such transactions worth UAH 2.2 trillion (US$93.7 billion) was about 2,500 in 2018 alone. Ukrainian taxpayers carry out the largest volumes of controlled operations with counterparties registered in Switzerland (33%), Cyprus (7.9%), and the UAE (6.3%), according to statistics. At the same time, bank transactions account for 46% of the total volume of such operations, while the share of commodity operations is 31%.
Verlanov says the structure of relevant controlled transactions shows that the share of goods exports is the largest (43%, worth UAH 2.4 trillion/US$102.3 billion). In particular, agricultural products account for 17% of goods exports, mineral raw materials (ores) for 20%, and metals for 20%.
"Therefore, exporters of this particular group of goods are in focus of our control over transfer prices. We also pay close attention to operations with intangible assets and those to finance Ukrainian businesses by parent companies," Verlanov said.