Summary and conclusions -
Ukraine is experiencing the fast development of outsourcing industry due primarily to IT outsourcing. This is supported by tax incentives introduced for the IT sector.
Ukrainian tax legislation embodies the international tax concepts of permanent establishment (PE) and transfer pricing (TP), which are based on OECD documents; however, the application of these concepts to outsourcing in particular does not follow the principles and commentaries contained therein. The OECD comment ary is not a source of law in Ukraine, which narrows the interpretation of a PE to the domain of domestic legislation and practice.
Cross-border outsourcing arrangements are not given special attention tax-wise in the legislation. Nor are there any tax clarifications/rulings or jurisprudence which would address cross-border outsourcing from a PE perspective (as happens, for example, in India). Outsourcing will be viewed from the point of view of the standard provisions of corporate profit tax (CPT) law, VAT, and in part of PEs, TP and place of supply rules.
PE exposure is an important consideration for cross-border outsourcing in Ukraine; however, currently the tax authorities still have insufficient know ledge and international experience to trace and identify PEs.
Originally published in Ukraine' chapter in edition 99a of the Cahiers de droit international.
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