KM Partners team defended the interests of the manufacturing enterprise belonging to the international group of companies, the world`s largest manufacturer of milk products, in a dispute concerning the transfer pricing issues. In this case, determined by enterprise prices were reviewed for compliance with standard market prices by using transactional net margin method. This case was considered by the court of appeal which confirmed the position of the court of first instance by admitting additional tax payments made by the State Fiscal Service illegal.
According to the case, the fiscal authority disagreed with the results of enterprise`s transfer pricing documentation analysis. In the Act on results of tax audit tax auditors at their own discretion calculated profit indicator and determined new market range of profitability, that resulted in conclusion that the level of the prices was not appropriate.
In accordance with the SFS statistics, around 90 % of taxpayers that fall under transfer pricing control apply the transactional net margin method. At the same time, its application gives a lot of contentious issues, court practice on which is not yet formed. First basis for forming such practice was made by the decision of the court of first instance in this case, delivered in December 2017, that resulted in positive outcome and claim satisfaction (we were writing about this in a newsletter “First in Ukraine: the victory of the KM Partners team in the dispute on the merits of TP rules concerning the net profit method”, please see more by the link: http://wts.ua/en/tax/first-in-ukraine-the-victory-of-the-km-partners-team-in-the-dispute-on-the-merits-of-tp-rules-concerning-the-net-profit-method-2). In this court case, the court interpretation of many important transfer pricing control aspects was presented for the first time in Ukraine. Details of this case and its importance are available by the link: http://kmp.ua/uk/blog/court-disputes-on-the-net-margin-method/.