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Ukrain vs Ajalyk Trade LLC, February 2020, Supreme Administrative Court, Case No 804/5360/17

Posted on February 24, 2020 | By Courts of Ukraine | No comments

Category: Commodity Transactions, Comparability Analysis, Transfer Pricing Methods | Tag: At the time of the transaction, Commodities, Comparability factors, Comparable Uncontrolled Price method (CUP), Differences in quality, Forward contract, Precise timing of the transaction, Timing of transaction

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In the case of Ajalyk Trade LLC, the Supreme Court ruled in favour of the tax authorities, confirming the legality of the tax adjustment.

The court held, that if the quantity and price of goods are determined in the specifications of the contract and/or in additional agreements, the contract cannot be considered a forward contract for tax purposes. As a result, the taxpayer cannot compare prices in controlled transactions with prices in comparable uncontrolled transactions at the time where such an agreement is concluded.

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Related Guidelines

TPG2022 Chapter II paragraph 2.20For the CUP method to be reliably applied to commodity transactions, the economically relevant characteristics of the controlled transaction and the uncontrolled transactions or the uncontrolled arrangements represented by the quoted price need to be comparable. For commodities, the economically relevant characteristics include, among others, the physical features and quality...

TPG2022 Chapter II paragraph 2.17In considering whether controlled and uncontrolled transactions are comparable, regard should be had to the effect on price of broader business functions other than just product comparability (i.e. factors relevant to determining comparability under Chapter I). Where differences exist between the controlled and uncontrolled transactions or between the enterprises undertaking...

TPG2022 Chapter III paragraph 3.28On the other hand, internal comparables are not always more reliable and it is not the case that any transaction between a taxpayer and an independent party can be regarded as a reliable comparable for controlled transactions carried on by the same taxpayer. Internal comparables where they exist must satisfy...

TPG2022 Chapter II paragraph 2.23The following examples illustrate the application of the CUP method, including situations where adjustments may need to be made to uncontrolled transactions to make them comparable uncontrolled transactions....

TPG2022 Chapter II paragraph 2.22A particularly relevant factor for commodity transactions determined by reference to the quoted price is the pricing date, which refers to the specific time, date or time period (e.g. a specified range of dates over which an average price is determined) selected by the parties to determine the price for...

TPG2022 Chapter II paragraph 2.21In order to assist tax administrations in conducting an informed examination of the taxpayer’s transfer pricing practices, taxpayers should provide reliable evidence and document, as part of their transfer pricing documentation, the price-setting policy for commodity transactions, the information needed to justify price adjustments based on the comparable uncontrolled transactions...

TPG2022 Chapter II paragraph 2.19Under the CUP method, the arm’s length price for commodity transactions may be determined by reference to comparable uncontrolled transactions and by reference to comparable uncontrolled arrangements represented by the quoted price. Quoted commodity prices generally reflect the agreement between independent buyers and sellers in the market on the price...

TPG2022 Chapter II paragraph 2.18Subject to the guidance in paragraph 2.2 for selecting the most appropriate transfer pricing method in the circumstances of a particular case, the CUP method would generally be an appropriate transfer pricing method for establishing the arm’s length price for the transfer of commodities between associated enterprises. The reference to...

TPG2022 Chapter II paragraph 2.16It may be difficult to find a transaction between independent enterprises that is similar enough to a controlled transaction such that no differences have a material effect on price. For example, a minor difference in the property transferred in the controlled and uncontrolled transactions could materially affect the price even...

TPG2022 Chapter II paragraph 2.15Following the principles in Chapter I, an uncontrolled transaction is comparable to a controlled transaction (i.e. it is a comparable uncontrolled transaction) for purposes of the CUP method if one of two conditions is met: a) none of the differences (if any) between the transactions being compared or between the...

Supplemental Guidance

Ukrain vs Totland LLC, November 2021, Supreme Administrative Court, Case No 580/2610/19Following a tax audit of controlled commodity transactions in 2013 and 2015, Ukrainian tax authorities assessed additional income tax against Totland LLC, arguing prices were understated. The Supreme Administrative Court dismissed the authorities' appeal in November 2021, upholding the Court of Appeal's finding that uncontrolled transactions used as comparables were...

Ukrain vs Dniproazot, July 2024, Supreme Administrative Court, Case № 160/3387/22Following a tax audit, Ukraine's authorities assessed additional taxable income against Dniproazot, arguing that arm's length commodity prices must be determined at the date of ownership transfer, not contract conclusion. The company appealed, but the Supreme Administrative Court upheld the tax authority's position in 2024, also rejecting the use of...

Ukrain vs “Novo-Sanzharsky Grain Storage LLC”, September 2024, Administrative Court, Case № 440/3712/24A Ukrainian grain storage company challenged a transfer pricing assessment in which the tax authority compared controlled grain transaction prices using non-public databases and a pricing date different from the contract conclusion date. The Administrative Court found in favour of the taxpayer in 2024, annulling the assessment on grounds that...

Ukrain vs “PJSC Vinnytsia Oil and Fat Plant”, September 2025, Supreme Administrative Court, Case № К/990/22546/25A Ukrainian oilseed producer sold sunflower, rapeseed, and soybean oil to a British Virgin Islands affiliate during 2015–2017. Tax authorities assessed additional corporate income tax using the CUP method, but Ukraine's Supreme Administrative Court dismissed the appeal, finding the comparable data were not publicly available in the audited years and...

Ukrain vs PrJSC “Poltava GZK”, June 2022, Supreme Administrative Court, Case No 440/1053/19A Ukrainian subsidiary of the Ferrexpo group, Poltava GZK, priced intra-group sales of iron ore pellets using Platts quotations under the CUP method. Tax authorities challenged the use of lower-grade price references for higher-quality pellets and disputed freight cost adjustments. After lower courts sided with the taxpayer, Ukraine's Supreme Administrative...

Ukrain vs Sumykhimprom, December 2019, Supreme Administrative Court, Case No 818/1786/17A Ukrainian mineral fertilizer producer faced transfer pricing challenges on export sales to a related party in Switzerland and natural gas imports from a related party in Cyprus. The tax authority assessed additional corporate income tax of UAH 43 million and reduced loss carryforwards by UAH 195 million. Ukraine's Supreme...

Ukrain vs PJSC Odesa Port Plant, October 2023, Supreme Administrative Court, Case No 826/14873/17Following a tax audit of PJSC Odesa Port Plant covering controlled transactions on mineral fertiliser exports to Swiss and other non-resident trading companies, Ukraine's tax authority challenged the use of the net profit method, arguing the comparable uncontrolled price method should have applied. The Supreme Administrative Court, in October 2023,...

Ukrain vs “LK Ukraine Group”,March 2023, Supreme Administrative Court, Case No. 1340/3525/18 (proceedings No. K/9901/11787/19)A Ukrainian agribusiness disputed the tax authority's finding that its controlled export transactions with related parties in Cyprus and the British Virgin Islands fell below the arm's length range. The company argued the CUP method was improperly applied due to incomplete cost data, citing Euronext exchange prices. The Supreme Administrative...

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Ukrain vs Ajalyk Trade LLC, February 2020, Supreme Administrative Court, Case No 804/5360/17

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