Offshore for Importers

There are two ways to import goods through an offshore company:

• Understating the value of goods imported into Ukraine that carry a high customs duty. In this case, you pay less "import" VAT and customs duty. However, the example described is not so simple – your taxable profit increases, and the question also arises of how to clear the goods through customs at no less than the indicative price.
• Overstating the price of goods imported into Ukraine that carry a low customs duty rate, thereby reducing the profit of your Ukrainian company. The "import" VAT paid when goods enter the customs territory of Ukraine is a tax credit, and when the goods are subsequently resold within Ukraine you incur tax liabilities, which results in paying the difference between the tax credit and the liability.

In Ukraine, as a country with a high corporate tax rate, there are restrictions on importing goods from low-tax countries included in the list of offshore zones approved by the Cabinet of Ministers of Ukraine.

Additional restrictions are also imposed by Article 39 of the Tax Code of Ukraine:

• if your company's total income exceeds UAH 150 million, (Art. 39.2.1.7 of the TCU)
• transactions carried out with "related parties"
• transactions with non-residents that are on the list of low-tax countries (Resolution No. 1045 of 27 December 2017 ) and also meet the criteria described in Art. 39 cl. 2.1.2, Art. 39 cl. 2.1, Art. 39 cl. 2.2
• as well as transactions with non-residents that do not pay corporate income tax — list of countries

The TCU also states that Ukrainian companies must file an annual report on controlled transactions. The tax authorities have the right to review the prices of such transactions if they do not correspond to market prices.