“Forward KT Limited” submitted a report on controlled transactions for 2013 to the tax authority on 13 May 2015. The tax authority found that Forward KT Limited had failed to submit the report within the filing deadline of 1 October 2014. In an appeal “Forward KT Limited” claimed that within the meaning of Article 39 24 of the Tax Code of Ukraine, transactions where one party is a non-resident registered in a country where the income tax rate is 5 percentage points or more lower than in Ukraine, provided that the amount of such transactions exceeds UAH 50 million during a calendar year, are considered controlled. The Republic of Cyprus was included in the list of such countries from 25 December 2013, and the total amount of transactions with a non-resident for the period from 25 December 2013 to 31 December 2013 was only UAH 25.5 million. The Administrative Court dismissed the claim in a ruling later upheld by the Administrative Court of Appeal. The lower courts concluded that transactions with the non-resident party for the period from 1 September 2013 to 31 December 2013 were controlled within the meaning of the Tax Code of Ukraine, and therefore the report on these transactions should have been submitted to the tax authority by 1 October 2014. “Forward KT Limited” then filed an appeal with the Supreme Court. Judgement of the Supreme Court The Supreme Court dismissed the appeal and upheld the challenged court decisions. Excerpts “(…)The courts of the previous instances found that the total amount of transactions between the plaintiff and the non-resident counterparty for the period from 23 October 2013 to 31 December 2013 was UAH 82,466,456.12. Given that the plaintiff’s counterparty is registered in a country included in the list of countries where the corporate income tax rate is 5 per cent or more lower than in Ukraine and the total amount of transactions for the relevant calendar year is more than UAH 50 million, the courts of previous instances concluded that the business transactions of the plaintiff and Ktonel Holdings Limited are controlled within the meaning of Article 39 of the Tax Code of Ukraine. In its turn, the plaintiff argues that in this case only those transactions that took place between 25 December 2013 and 31 December 2013, i.e. from the date of adoption of the Cabinet of Ministers of Ukraine Resolution No. 1042-р dated 25 December 2013, should be taken into account. According to the plaintiff, the amount of the transaction for the said period is UAH 25,495,054.92, i.e. the transactions are not controlled. Sub-clause 39.2.1.4. of clause 39.2 of Article 39 of the Tax Code of Ukraine stipulates that the transactions referred to in sub-clauses 39.2.1.1 and 39.2.1.2 of this Article are recognised as controlled provided that the total amount of the taxpayer’s transactions with each counterparty equals or exceeds UAH 50 million (excluding value added tax) for the relevant calendar year. The court agrees with the conclusion of the courts of previous instances that if the total amount of transactions between the taxpayer and a non-resident whose place of registration is a country included in the List exceeds or equals UAH 50 million in the period from 01.09.2013 to 31.12.2013, such transactions are controlled.” (…) “The court agrees with the argument of the court of first instance that the actions of the plaintiff in preparing and submitting to the controlling authority the report on controlled transactions for 2013 on business transactions with Ktonel Holdings Limited refute the plaintiff’s claim that there are no signs of a controlled transaction, since by its actions the plaintiff has actually acknowledged the fact that it has an obligation to submit such a report. In view of the foregoing, the court agrees with the conclusion of the courts of first instance and appeal that the plaintiff’s business transactions with Ktonel Holdings Limited for the period from 1 September 2013 to 31 December 2013 are controlled within the meaning of the Tax Code of Ukraine, and the report on these transactions should have been submitted to the controlling authority by 1 October 2014. The arguments of the cassation appeal have not been confirmed and are refuted by the case file and do not give grounds to believe that the courts of first instance and appellate courts violated the substantive and procedural law in making the contested decision. Pursuant to Article 350(1) of the Code of Administrative Procedure of Ukraine, the cassation court shall dismiss the cassation appeal and leave the court decisions unchanged if it finds that the courts of first instance and appellate courts did not misapply substantive law or violate procedural law in making court decisions or performing procedural actions. The Supreme Court, having reviewed the decision of the court of first instance and the decision of the court of appeal within the arguments and requirements of the cassation appeal and based on the established factual circumstances of the case, having verified the correct application of substantive and procedural law by the courts, sees no grounds to satisfy the cassation appeal”. Click here for English translation Click here for other translation ...

The Federal Tax Administration of Argentine (AFIP) has published a non exhaustive list of 41 Low and No Tax Jurisdictions (LNTJ). The list related to Law 27,430 from 29 December 2017 which introduced certain adverse tax implications for transactions with LNTJs. For instance, according to the Law transactions with unrelated parties in LNTJs are not deemed arm’s length for transfer pricing purposes. Furthermore such transactions are required to be reported to the tax authorities. LNTJs refers to jurisdictions where the income tax rate is 60% lower than the minimum 25 % CIT rate applicable in Argentina. Hence, LNTJs are jurisdictions that apply an income tax rate lower than 15%. Click here for English Translation ...