Transfer Pricing

The TP rules of the Republic of Uzbekistan are the basis for identifying controlled transactions, diagnosing risks, and forecasting the volume of upcoming documentation related to controlled transactions. In this regard, the KPMG team can provide the following services:

• identify controlled transactions among the company's total number of transactions
• determine the number of transactions recognised as controlled under the Uzbek Tax Code
• conduct a brief analysis of controlled transactions based on relevant agreements and a general understanding of the Company’s activities
• advise on the TP method that may be applied, taking into account Chapter VI of the Uzbek Tax Code
• conduct a brief economic analysis using indicative benchmarking studies of price/profit levels
• identify potential TP risks and recommendations on how to mitigate them

We help our clients thoroughly review intra-group transactions for business decisions and adopt an integrated approach to TP projects by harnessing KPMG global TP knowledge and capabilities and enlisting the services of other KPMG professionals working in the fields of corporate tax, customs, business advisory and legal services.

According to Uzbekistan TP legislation (Section V.1 of the Uzbek Tax Code), companies and representative offices of foreign companies whose income is subject to taxation in the Republic of Uzbekistan, and which have controlled transactions, are obliged to notify the tax authorities about such transactions and provide documentation on them upon the tax authorities’ request. In this regard, the KPMG team can provide the following services:

• Prepare notifications on controlled transactions in accordance with Uzbek tax legislation.
• Prepare documentation on controlled transactions in accordance with Uzbek tax legislation.

Taxpayers are now required to submit to the tax authorities a notification about controlled transactions in the prescribed form. The notification must be submitted no later than the deadline for submitting annual financial statements for the calendar year in which the controlled transactions were made.

Any company registered in Uzbekistan (as well as the representative office of a foreign company whose income is subject to taxation in Uzbekistan) having controlled transactions must submit to the tax authorities a notification about such transactions no later than the deadline for submitting annual financial statements for the calendar year in which the controlled transactions were made. The notification must be submitted by each of the parties to the controlled transaction registered in Uzbekistan, and paying taxes in the country.

The notification must be submitted according to the form and procedure approved by the State Tax Committee of the Republic of Uzbekistan, in coordination with the Uzbek Ministry of Finance.

Failure to provide a notification could lead to the tax authorities including the company in their list of companies in which TP audits should be conducted in the future. In this regard, the KPMG team can provide the following services:

• methodological support and assistance for companies preparing notifications on their own;
• finalising notifications prepared by clients in an XML format from any type of automated accounting system;
• comparing notifications submitted by both parties to a transaction, and checking whether the information is represented identically in both notifications (for groups of companies).

Our team comprises professionals with extensive knowledge and experience in transfer pricing, accounting, and tax accounting (according to the standards of the Republic of Uzbekistan and IFRS).

KPMG specialists have experience in working with various automated accounting systems and extensive experience in preparing notifications on controlled transactions in various databases.

We can also draw on IT specialists who provide technical support during the notification preparation process, and fine tune XML-format files produced by the company’s accounting system.

Our KPMG team will help you prepare your controlled transaction notification in full compliance with the Uzbek Tax Code, and ensure that it is submitted to the tax authorities within the respective deadline.

Taxpayers are required to prepare and submit to the tax authorities documentation confirming the economic feasibility of the applied price in a controlled transaction within 30 calendar days after receiving a request. The contents of documentation for tax control purposes are regulated by Article 193 of the Uzbek Tax Code.

Respective penalties:

• in the event of the non-payment or incomplete payment of tax due to applying prices that do not correspond to the market level, a penalty of 40% of the unpaid amount of tax applies;
• no penalties are envisaged for failure to submit documentation for tax control purposes.

However, if TP documentation is available the tax authorities are obliged to refer to it. If they disagree with it, they must first challenge the taxpayer’s approaches and only then apply what they believe to be acceptable approaches to assess market price levels. Therefore, a lack of documentation makes it easier for the tax authorities to challenge prices in controlled transactions. In addition, by preparing TP documentation the taxpayer demonstrates a willingness to comply with all legal requirements, and this in turn can increase the likelihood of a positive result to a tax authority audit (as well as any court case). Here the KPMG team can provide the following services:

• prepare documentation for tax control purposes on a turnkey basis for all types of transactions;
• check the correctness of documentation prepared by the taxpayer for tax control purposes;
• adapt documentation prepared by the taxpayer for tax control purposes, or separate sections of documentation (descriptions, functional analysis, benchmarking studies, etc.).

KPMG professionals have extensive experience and knowledge in TP, accounting and tax accounting, and international taxation. During projects, KPMG specialists prepare documentation, provide assistance during the resolution of disputes over its preparation, and advise on current issues.

KPMG provides a range of services related to TP and improving tax function performance. Our professionals have extensive expertise in TP, accounting and tax accounting, and international taxation. We will be pleased to assist you during all stages of a project’s implementation and will do our utmost to successfully resolve the issues that you face.

Our services related to supporting companies during pre-audit analysis and tax audits:

• support during pre-audit analysis, including liaising with the tax authorities, examining the requirements/calculations of tax authorities, and preparing draft responses;
• support during tax audits of transfer prices, including via liaising with the tax authorities, and preparing draft responses / justifications of controlled transactions;
• support during the out-of-court resolution of TP disputes and litigations, as well as legal representation in court;
• tax audit modelling: holding interviews, identifying potential risks, looking at the tax authorities’ line of reasoning, collating and analysing information from various public sources.

KPMG specialists have extensive experience and knowledge in transfer pricing, accounting and tax accounting, and international taxation. We perform benchmarking studies using a unique software that allows a set of comparable companies to be quickly identified, taking into account Uzbek TP legislation. Our team can prepare benchmarking studies for various types of transactions and industries:

• service provision transactions
• commodity transactions
• IP-rights transactions (royalties)
• financial transactions

Uzbek benchmarking studies can be used to not only check that the prices of completed transactions comply with the market level, but also to ensure that prices and financial results in controlled transactions comply with the market level throughout the entire reporting period, which eliminates the need for subsequent year-end price adjustments.

The KPMG team runs practical sessions and webinars on the most important and topical TP issues. The general programme in this regard consists of the following modules:

Module 1. Recent and planned changes in transfer pricing legislation.

Module 2. Transfer pricing in commodity transactions.

Module 3. Transfer pricing in service provision transactions.

Module 4. Calculating actual profitability indicators and comparisons with the market level.

Module 5. Transfer pricing in financial transactions (loans and guarantees), including an overview of BEPS changes.

Module 6. Transfer pricing in IP transactions.

Module 7. Advance pricing agreements and mutual negotiation procedures.

Module 8. Overview of recent transfer pricing court practice in CIS.

Module 9. Transfer pricing reporting: notification and documentation.

Course duration

The standard course lasts for two working days; each day consists of four-to-five modules.

The knowledge obtained during the course will help you develop a systematic approach to understanding TP issues. The main objective of the modules is to boost the practical skills of participants when applying TP rules.