How Systematically Implemented Regulatory Changes Have Replaced Real Control over Export of Capital from Ukraine. Comment of Volodymyr Rak, the Company Counsellor, for The Dzerkalo Tyzhnia. Ukraine, Issue No. 35

“Let’s suppose that A Company is selling its rights to B Company. The transaction is classified as a controlled one, so A Company raises an issue as to applying a certain method of estimation of the market value price for the purposes of funds transfer pricing. In this case it may be done only by means of the comparable uncontrolled price as it is difficult to apply other methods from the point of view of substantiation and availability of information,” an example is given by Volodymyr Rak, a Counsellor of Moris Group Law Company. “However, exchange quotations may not be applied to these corporate rights in practice. In European or Asian countries with the developed stock and corporate rights market there may be a legal opportunity to gain information on transactions and prices being compared, but in Ukraine it is impossible. Therefore, A Company has to order services of independent expert evaluators. Tax authorities doubt lawfulness of such evaluation as the Tax Code provides for use of this source of information only in cases evaluation is compulsory. Herewith the judicial prospects of the dispute with the fiscal authority in this situation are definitely for the benefit of A Company as neither courts nor the company have another source of information on the market value of this transaction. The same situation has developed not only with shares and corporate rights, but also with other financial transactions as to which it is difficult to credibly estimate cost-efficiency factors. In fact, when it comes to such financial transactions as sale of corporate rights and shares, assignment of claim, and factoring, there are no data on comparable transactions”.