Expanded criteria for the related parties and transfer pricing

We present for general information a concise clarification of certain legislative amendments regarding the latest legislative amendments envisaging the expanded criteria for the related parties and transfer pricing. We trust that this publication will provide new practical insights and help avoid potential mistakes in connection with the legislative changes described below.

As of 2025, the criteria for recognizing the related parties were significantly expanded, and the conditions under which the transactions shall be treated as the “controlled transactions” for the purposes of the transfer pricing rules were clarified. The changes were aimed to enhance the counteraction against tax evasion and to align Ukrainian transfer pricing rules with international standards.

The criteria for recognizing parties as the related parties now include economic interdependence. New grounds for establishing related party status were also introduced. In particular, the legal entities are deemed as the related parties if:

• the revenue of a resident legal entity from sales of goods, works, or services to a single non-resident legal entity or foreign organization without legal entity status accounts for 75% or more of the total revenue from all non-residents within a calendar year, provided that such revenue accounts for 50% or more of the total annual revenue of the resident legal entity; or

• the value of goods, works, or services purchased by a resident legal entity from a single non-resident legal entity or foreign organization without legal entity status accounts for 75% or more of the total value of all such purchases from non-residents during the calendar year, provided that the total value of such purchases equals or accounts for 50% of the resident’s total annual purchases.

Additionally, the minimum threshold for equity ownership in the subsequent legal entity in a control chain, used to determine related party status, was increased from 20% to 25%.

It is also noteworthy that starting from 2025, the tax authorities are authorized to establish the related party status not only through court proceedings but also as a result of tax audits.

Another important development relates the updated approach to compiling the list of jurisdictions for transfer pricing purposes. The updated criteria now include:

• inclusion in the list of offshore jurisdictions approved by the Cabinet of Ministers of Ukraine;

• designation as a non-cooperative jurisdiction in combating money laundering, based on assessments by international organizations;

• failure by a foreign competent authority to ensure timely and complete exchange of tax and financial information with Ukrainian authorities for two consecutive reporting periods.

Transactions with the “non-related” non-residents which are not the payers of corporate income (including foreign-source income) tax or are not the tax residents of their country of registration shall not be recognized as the controlled transactions, subject to, at least, one of the following conditions: the non-resident is a tax resident of a country with which Ukraine has concluded a Double Tax Treaty (excluding jurisdictions listed by the Cabinet of Ministers of Ukraine), or all participants (partners) of the non-resident are the residents of such countries.

It should be also noted that the list of jurisdictions relevant for transfer pricing purposes under subparagraph 39.2.1.2 of Article 39 of the Tax Code of Ukraine was significantly revised. The updated list was reduced from 78 to 46 jurisdictions. The countries with effective tax treaties with Ukraine were removed, while those included in the government’s offshore list or in the FATF blacklist were retained. Jurisdictions failing to ensure proper tax and financial information exchange were also added.

Generally, these legislative developments expand the application of transfer pricing rules and strengthen control over the cross-border transactions. Therefore, the businesses engaged in international operations are advised to reassess their operating models and evaluate the risks associated with dealings involving non-residents.

Finally, it is worth mentioning about the recent amendments regarding the Controlled Foreign Companies (CFCs). The penalties will not be imposed for violations committed by the controlling persons during the period from 1 January 2022 until the last day of the month in which the Martial Law is terminated or cancelled. This relief applies subject to the condition that the controlling persons fulfill their reporting obligations under Article 39-2 of the Tax Code of Ukraine within six months after the termination or cancellation of the Martial Law. Administrative and criminal liability under such circumstances will not be applied.

Нope this information proves useful to you. Please note, however, that this summary is intended for general informational purposes only and does not cover all possible aspects and risks, which may require more detailed analysis in a specific legal opinion. Should you have any questions or require further clarification or assistance, please do not hesitate to contact us.

Author: Dmytro Dovzhyk, Attorney-at-Law and Partner at ArtesLex
3 July 2025