The Order of Conduct for the Monitoring of Controlled Operations has been approved

The Ministry of Finances has approved the conduct of controlled operations monitoring with Decree № 706 dating from the 17th August 2015.

The document defines the direction and the specifics of implementing a monitoring of controlled operations (hereinafter- monitoring) by the monitoring authorities, which is conducted in accordance to subparagraph 39.5.1 , paragraph 39.5 of article 39 of Chapter 1 of the Tax Code.

The aims of the monitoring as an integral part of tax control over transfer pricing are:

• To verify the compliance of the conditions of the controlled operations with the “arm’s length” principle.
• To identify the potential risks of transfer pricing.
• To conduct a risk analysis in relation with the understatement of the tax payer’s liability
• To ensure control over the timeliness and completeness of a report concerning control operations and documentation on transfer pricing.

The Monitoring is conducted in the following manner:

• By surveying the prices and conditions , which are applied by the parties to the controlled operations
• By analyzing information presented by the tax payer concerning undertaken controlled operations, reports about controlled operations and documentation concerning transfer pricing.
• By analyzing data sources, containing information and records concerning the economic activity of the tax payers and/or information necessary to establish the compliance of the conditions of the control operations with the “arm’s length” principle.

During the conduct of the monitoring, the monitoring authorities use:

• Information sources in accordance with subparagraph 39.5.3, paragraph 39.5 of article 39 of Chapter 1 of the Tax Code.
• Software and information files of the executive authority’s central body, which implements the state’s policy concerning tax and customs.
• Information presented by the tax payers concerning undertaken controlled operations, reports about the controlled operations and documentation on transfer pricing.
• Information (files and data) of the monitoring authorities
• State authority’s information, information from state authorities of other countries
• Any public information concerning the possible risk of understating the taxpayers’ liabilities during the conduct of the controlled operations.

In order to verify the compliance of the conditions of the controlled operations with the “arm’s length” principle, the officials of the monitoring authority have the right to conduct debriefings of executives and/or employees of the tax payer during the analysis of reports on the controlled operations and/or the documentation on transfer pricing.