TAX POLICY

BULANA Oleksandra

Harmonization of transfer pricing and customs valuation of goods

The growth in the volumes of cross-border transactions throughout the world and in particular the increased volume of those transactions that are made among the subsidiaries of multinational corporations, results in an emerging issue of determination of the fair market price of goods for tax purposes. Transfer pricing methods are used for adequate distribution of income among the subsidiaries of multinational corporations located in different tax jurisdictions. Meanwhile, the customs valuation methods determine the price of goods (considering specifics of transactions between related parties) for the purposes of customs’ clearance and fair collection of import taxes. Although the both approaches aim at arriving to the fair market value, there are considerable differences between them, so that the price of goods for the same transactions can vary significantly. This fact creates a number of major risks both for fiscal authorities and taxpayers. This paper reviews the main legal and methodological differences between two mentioned approaches to determination of the price for imported goods. In particular, it was found that implementation of transfer pricing and customs valuation is applied under different legislation and international guidelines. Although in recent years an active discussion of this problem rises in the world, a common approach to reconciliation of transfer pricing and customs valuation has not been developed yet. The author has reviewed the proposals of the World Customs Organization, the International Chamber of Commerce and WTO on the harmonization of customs valuation and transfer pricing. The main achievement of this research is development of high-level recommendations on the harmonization of procedures for control over transfer pricing and customs valuation in legislation and customs practice in Ukraine.

Keywords: transfer pricing, usual price, customs valuation, import of goods

JEL: E30, E64

BULANA O. . Harmonization of transfer pricing and customs valuation of goods / O. . BULANA // Фінанси України. - 2014. - № 4. - C. 83-93.